It is no secret by now that more consumers want to eat more and more organic or naturally raised foods. The fight against antibiotics, hormones and use of GMO franken-feed for animals has become one of the most easily recognized megatrends in America.
So, what do you think about news that Hormel Foods Corp. (NYSE: HRL) is making an acquisition of a leading natural and organic meats company?
Hormel has announced that it has entered into a definitive agreement to acquire Applegate Farms. The $775 million acquisition will add the Applegate brand to Hormel’s lineup. Applegate is listed by Hormel as the number-one brand in the natural and organic value-added prepared meats category.
So, the real question is how consumers are going to react. Applegate is all over the refrigerated racks at Whole Foods and other grocery chains as a top organic and natural prepackaged meat product.
As far as why this might come with some brand recognition issues for those die-hard organic and natural meat and food buyers, that is simple: the name Hormel is often associated with salty canned and prepackaged foods. Some of Hormel’s top products you might recognize from the shelves of grocery stores: Hormel Chili, Hormel Compleats, Hormel Taco Meats, Spam, Jennie-O Turkey Store, Black Label Bacon and dozens of others.
While the merger is subject to customary closing conditions and regulatory approvals, the deal was said to be expected to close within 60 days. Based on how many deals have been around for large companies wanting to acquire private consumer product lines, 24/7 Wall St. would predict almost immediately that the Federal Trade Commission and Department of Justice would have little if anything as a reason to try to block this deal.
So, it does not look like this is going to end up being a move to sell organic Spam at grocery stores. Sorry, but it just seems almost impossible to imagine that Whole Foods or other high-end natural and organic grocers would want to ever try to put up an organic version of the canned Spam on their shelves.
The good news about this deal is that Hormel outlined how it wants to operate Applegate. The press release was specific to say that Applegate will operate autonomously and would be a standalone subsidiary in Hormel’s Refrigerated Foods segment.