Spam sales up, but Hormel profits down

by Pan Demetrakakes
Executive Editor

Hormel Foods is enjoying a spike in demand for its iconic Spam, but that wasn’t enough to save the company from a one-third earnings decline in the last quarter.

Spam, the long-established chopped, canned pork product, is experiencing something of a surge, probably due to tough economic times. Hormel has been running Spam lines two shifts a day, seven days a week, since July, and has told its union to expect to stay on that schedule for the foreseeable future.

The business agent for the union told the New York Times that Spam’s surge is undoubtedly due to the economy. “We’ll probably see Spam lines instead of soup lines,” he said.

The good news for Spam is that it’s one of the cheap, filling foods that seem to do well in hard times. Kraft Foods, for instance, has seen spikes for such basic products as Jell-O, Velveeta processed cheese and Kool-Aid. These sales increases have contributed to good results for Kraft: It reported an earnings increase of 9.1% on a sales jump of 21% in the most recent quarter.

Hormel, however, hasn’t fared as well. Although sales were up 12% in the most recent quarter from the previous year, earnings dropped 33%.

Management cited rising fuel and feed costs, a glut of turkey breast meat, and a $20 million investment loss in a trust fund for executives. In addition, items like Spam, as well as chili and luncheon meat, attract consumers in tough times but also have lower profit margins.

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