By Atossa Araxia Abrahamian
NEW YORK, Sept 27Since Hillshire Brands
spun off from the Sara Lee Corp. last June, CEO Sean Connolly
has made a point of thinking outside the box - and even beyond
the traditional pig and cow.
Connolly, 47, joined Hillshire last year after serving as
the president of Campbell North America. He has focused
for the last year on energizing the brand, best known for Jimmy
Dean sausages. He is trying to reach a broader and younger
consumer base and get creative with poultry and even no-meat
He has also tried to foster a more collaborative atmosphere
at work, moving into a office with an open design and no special
"I am incredibly pleased with the amount of progress we've
made in first year, but I am clear-eyed about the fact that it's
the first year," he said in an interview this week with Reuters.
The largest and most important part of the company's
business is packaged meat. The $1 billion Jimmy Dean brand's
sales grew in the high single digits in the 2013 fiscal year,
the company said.
The overall company, however, has seen sales slip due to
high commodity prices and stiff competition. In the fourth
quarter, operating income fell 23 percent and sales fell 2
percent. Earnings were 26 cents per share, topping the analysts'
average estimate by a penny, and net income fell to $41 million,
or 33 cents per share, from $599 million, or $5.02 per share, a
Out of ten analysts with a recommendation, only one has
rated Hillshire as a "buy" according to Thomson Reuters, but
none put a "sell" on the stock. Others have ratings of "hold",
"outperform" or "overweight."
Connolly nevertheless remains optimistic that in the
long-term, the company will be profitable, helped by healthier
and more portable meat products but also chicken, turkey, and
"The vast majority of our products have meat in them -- meat
is the 'hero ingredient', as we say -- but we are building
relationships with households, and in come cases, the household
is saying 'hey, every now and then I want a choice that doesn't
have meat'" Connolly said.
He said Aidells -- an organic, hormone-free and
antibiotic-free line of chicken and turkey sausages, acquired by
Sara Lee in 2011 - is its fastest growing brand.
The "artisanal" sausages and meatballs, which are among the
company's most expensive products, come in unusual flavors such
as spicy mango with jalapeno and pineapple and bacon. They are
part of Hillshire's Gourmet Foods Group, which grew in the
single-high digits last year, according to the company.
Another well-received new breakfast, according to Connolly,
is a Jimmy Dean-brand low-calorie flatbread with egg whites,
Mozzarella-style "cheese product", and spinach -- a rare
vegetarian item in Hillshire's portfolio.
Morningstar analyst Ken Perkins said that Hillshire is
trying to "appeal to a broader customer -- so if you have a
family where someone eats meat and likes Jimmy Dean, but someone
else doesn't like meat, they've got a meatless offering that's
just as good."
Perkins added that some of these products have the benefit
of appearing healthier -- something that more and more consumers
Hillshire's share price is currently at $30.86, which
Morningstar considers slightly above "fair value."
One of Hillshire's biggest challenges is to capture the
attention of Millenial consumers -- whom Connolly described as
"very discriminating" -- in a competitive market that includes
Kraft Foods Group, Tyson Foods, Inc., and
Hormel Foods Corporation.
"They are the future of Hillshire's brands, so it means our
brands must evolve to meet their needs," Connolly said.
Connolly -- who enjoys fishing with his sons on days off --
also said the company would consider expanding its
recently-acquired Golden Island jerky business to include more
than beef and pork to accommodate consumers' demands for a
"There's no turkey in the lineup yet but we're certainly
looking at more innovation in the jerky category down the road,"
Timothy Raney, an analyst at D.A. Davidson & Company, said
that while he sees opportunity in the packaged meat sector,
Connolly's focus on innovation and higher-end products might not
play to Hillshire's core strengths.
"Aidells is a great product, but it's a small percentage of
the company for sure so they need to be doing Aidells and five
other things like that," Raney added.
"I think that their strategy is probably sound. But I don't
have a lot of illusions about this becoming a high-growth
company. It's a packaged meat company and innovation's important
but I suspect they're a little aggressive in terms of their view
to the long-term outlook for the future" said Raney.