June 19, 2009 / 11:31 AM / 10 years ago

Hormel, Herdez Del Fuerte form U.S. food venture

* New venture to have $200 million in sales

* Hormel sees new venture adding to earnings

By Brad Dorfman

CHICAGO, June 19 (Reuters) - U.S. food maker Hormel Foods (HRL.N) and Mexico’s Herdez Del Fuerte are forming a joint venture to sell Mexican foods in the United States, tapping into a fast-growing market.

The new venture, called MegaMex Foods, will bring together brands like Hormel’s Chi-Chi’s salsa and Herdez’s La Victoria Mexican sauces and start off with about $200 million in annual revenue, Hormel Chairman and CEO Jeffrey Ettinger said in an interview with Reuters.

Combining the two companies’ Mexican food businesses into a joint venture will help them become more competitive in a U.S. market that has seen a fast-growing Hispanic population and rising popularity of Mexican foods in general.

For instance, sales of salsa, Mexican sauces and seasoning mixes at U.S. food, drug and mass merchandise stores jumped 8.1 percent to $1.51 billion in the 52 weeks ended May 16, according to The Nielsen Co.

By combining resources, the venture will be able to choose employees from both companies and manufacture products in either country, depending on which plant is best suited for a product, Ettinger said.

“We think the combined strengths of the two companies will really leapfrog us ahead of others,” Ettinger said.

Hormel, which is better known for its Spam processed meat and Dinty Moore canned stew, will see its earnings boosted by its 50 percent stake in the venture, Ettinger said.

While the venture will initially focus on shelf stable packaged foods, MegaMex could also expand into refrigerated foods like fresh salsa, Ettinger said.

Herdez Del Fuerte is a joint venture between Mexico’s Grupo Herdez SAB de CV (HERDEZ.MX) and Grupo KUO SAB de CV (KUOB.MX). (Reporting by Brad Dorfman; Editing by Gary Hill)

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