Hormel ups production of famed Spam, stew and chili

CHICAGO (Reuters) - Spam and Dinty Moore stew are turning up on more American tables again, Hormel Foods Corp's top executive said on Tuesday, as consumers look for cheaper meals to help them through one of the toughest economic times in U.S. history.

More consumers are buying Hormel's famous Spam lunch meat, introduced in 1937, and its canned stew and chili, both sold since 1935, and this is pressuring the company's higher-priced convenience foods, like microwaveable Hormel Compleats meals, Chief Executive Jeffrey Ettinger said.

"We do see some trade-offs being made by consumers," Ettinger said in an interview after Hormel posted a 33 percent decline in fourth-quarter profit.

Hormel, which has already used existing facilities during some weekends to meet demand, now plans to produce canned goods at a new facility in Iowa that was supposed to be just for microwaveable meals. That facility is due to open around January 2010, Ettinger said.

Hormel was "really pushing capacity limits" at its canned food facilities and may have had to add to an existing production facility to meet demand if it was not already building the new plant, Ettinger said.

"Those production lines have been very busy and probably will continue to be," he said.

Spam became popular during World War II when Hormel sent the tinned meat to troops in response to a call for food that would not spoil on the battlefield.

Americans at home, hardpressed to buy meat because so much food was being used to supply the military, bought Spam with green ration coupons. Its low cost and long shelf life suited the times, as did Dinty Moore stew and Hormel chili.

Sixty-three years after the war ended, as the U.S. economy weakens and more and more jobs are lost, Americans are rediscovering these canned staples.

MICROWAVEABLE FOOD NOT GOBBLED UP

Del Monte Foods Co and ConAgra Foods Inc have introduced microwaveable meals, but Ettinger said that is not the main reason consumers are less often buying Hormel's Compleats.

"There's just sort of a general slow down in these convenience-based meals as consumers are figuring out how to best react to the recessionary environment," he said.

Turkeys are another story. Hormel's Jennie-O turkey business is brisk this time of year because of the U.S. Thanksgiving holiday.

While Ettinger did not have total sales figures for the Thanksgiving season, he said the business that sells whole birds is "in fine shape." However, it has been dealing with an oversupply of turkey breast meat and rising costs.

"We expect it to be a back-to-home Thanksgiving for a lot of folks," and it would not be a surprise to see some people buying larger turkeys for bigger gatherings, Ettinger said.

Still, the whole turkey business has never been a high margin area, he said.

Hormel said it was delaying non-urgent capital projects because of tight credit markets and reduced consumer spending.

One project now on hold is a plan to add office space and a better break room at Hormel's Austin, Minnesota headquarters. The company was starting to work on plans for that expansion, but now the project is being deferred "until the overall economy is in a better position," he said.

Hormel is, however, increasing advertising spending by 5 percent to 10 percent, Ettinger said.

(Reporting by Jessica Wohl; Editing by Toni Reinhold)