CHICAGO Hormel Foods Corp (HRL.N) may again raise prices of its products following an initial round of increases, because of higher costs for packaging and fuel, its CEO said.
"As we head further into the summer and fall, that is something we have to examine -- where pricing is on some of the items," Hormel Chief Executive Jeffrey Ettinger said on Wednesday at the Reuters Food and Agriculture Summit in Chicago.
Ettinger said the magnitude of the price increases would vary, depending on the products, which range from Spam canned meat and Dinty Moore stew to Hormel meats and turkeys from Jennie-O Turkey Store.
"On some of the market-based items, the increases have been in the lower double-digit area," Ettinger said, referring to products such as bacon, where the price of the product is largely tied to the commodity price. "On more of the branded items, increases vary based on strength of brand, consumers, competition."
In addition to increasing prices on a broad array of products, Ettinger said, the company was trying to offset inflation through increased efficiency.
The comments came on the heels of news that U.S. producer prices surged in February at their fastest pace in 1-1/2 years. Food prices were a key contributor -- increasing the most since 1974, with a jump of 3.9 percent.
So far, price increases have not greatly hurt sales of Hormel products, he said..
"People are slow to change their habits," Ettinger said.
Last month, the company increased its full-year earnings forecast after profit in its Jennie-O Turkey Store segment rose 122 percent due to favorable commodity meat margins and improved efficiency.
Hormel, like other meat companies, has had to pay higher prices for beef and pork because of smaller cattle and hog herds and strong meat exports. In addition, high corn prices -- the result of more corn going to exports and to make ethanol -- increased production costs for the nation's poultry producers.
Hormel currently generates about 4 percent of its sales from overseas markets such as China, Korea and Vietnam. Ettinger said sales abroad were growing faster than for the company overall.
Hormel's goal is to increase revenue by 5 percent a year and earnings per share by 10 percent per year. By contrast, Ettinger said revenue at the international business is rising by more than 10 percent per year and earnings by 15 percent to 20 percent per year.
Ettinger said for now, the company is looking to expand its growth in the markets Hormel is already in, rather than expand into new markets.
"We're just scratching the surface on what our product lines could do in those markets. We're much more likely to try to double-down on the territories we're already doing something in," Ettinger said.
"The wild card does become acquisitions. You could do something in a hurry if you find the right partner or acquisition to make, and clearly we're open to considering that," Ettinger said.
(Editing by Matthew Lewis and Steve Orlofsky)