Hillshire’s fix, drive, expand plan
BOSTON — With a portfolio of iconic processed meat brands such as Hillshire Farm, Ball Park, Jimmy Dean and State Fair, it isn’t surprising Hillshire Brands’ focus on the future is “meat-centric.” What is surprising is where the company wants to push its brands in an effort to achieve growth and profitability.
Speaking at the Barclays Back to School Conference on Sept. 5, Sean Connolly, chief executive officer, outlined his plans for the company following its spin-off from the Sara Lee Corp. in late June. With $4 billion in total revenues, 85% are in processed meats and 15% are in bakery. Three quarters of Hillshire’s revenues are generated through retail channels while the other 25% is food service.
Mr. Connolly said the company’s growth model is based on three prongs.
“The first is to continuously strengthen our core,” he said. “This is something we haven't done consistently in the past when we were part of a company that grew as big as $18 billion or $20 billion. Continuously strengthening the core is about minding the devil in the details of our core business. It's about product quality upgrades. It's about new news. It's about getting our pricing right, getting item assortment right on the shelf with customers and ultimately supporting the core business with advertising so you can keep your brands top of mind with consumer.”
Mr. Connolly said the second prong involves shifting the company’s brands into new market adjacencies.
“Think about Jimmy Dean,” he said. “From 1970 to 2000, it was a roll sausage business. It was a good one but it wasn't doing much. And in the year 2000, we reframed that business and so Jimmy Dean is really about convenient protein solutions in the breakfast day part.”
The company is now following a similar strategy with Ball Park.
“… We've taken a brand in Ball Park that was always about refrigerated and always about hot dogs and we've reframed it to be Ball Park is about better guy food for better guy times,” he said. “So when you think about guy food, you should think about Ball Park. And you’ve seen us get Ball Park into things like flame grilled burgers and now into mini meals and snacking.”
The third growth prong involves acquisitions that support Hillshire’s strategy.
“We did this quite successfully with Aidells in the course of the last year where we acquired a brand that gave us access to a new consumer, a new channel of trade with Whole Foods but also a different price tier, the ultra-premium price tier,” Mr. Connolly said. “So it was perfectly incremental to our category. We’ll continue to, in a disciplined way, look for acquisition opportunities that round out our portfolio and give us additional strength with our customer as well as unleash some of the operating leverage in our asset base.”
He identified two markets where Hillshire Brands will focus its innovation efforts — meat-centric meals and meat snacks. He described meat-centric meals as a $68 billion category that is growing and in which Hillshire only has a 4% share.
“But what we’ve learned is that our trademarks have the potential to source volume from this market as we activate them in new and provocative ways and give the consumer solutions that fit into their busy lives,” he said.
Mr. Connolly described the meat snack category as emerging as consumer eating patterns continue to change.
“… As you look at the data and how consumers are eating, it used to be breakfast, lunch, and dinner across the board,” he said. “Now, 20% of consumer eating occasions are snacking. And even the main meals, which are dinner and lunch, tend to look more and more like mini meals. Why is that happening? It's happening because people tend to graze throughout the day.”
New products introduced under the Ball Park brand include its Flame Grilled hamburger patties, which were launched in February, and Pepperoni Stadium Stuffers, which are frozen snacks.
Hillshire is growing the Jimmy Dean brand through the introduction of Gourmet Creations sausages and a “snack size biscuit” Mr. Connolly said will push the brand into the snack category.
“So, here's our three-year plan,” he said. “I characterized it with the words ‘fix, drive, and expand’ to be very transparent about our agenda. This year is a transition year. You clearly understand that. We are unwinding the company from Sara Lee, which has been an incredible undertaking. We have weak spots in the business because some of the business has been neglected. We've got to fix those.
“Our innovation pipeline has not been where it needs to be. I've had to put a new innovation team in place and Sally Grimes is leading that. She has joined our company since investor day. And we've got to deliver on our cost programs. And then as our marketing programs gain traction, as our innovation becomes ready for prime time, as our cost programs continue to emerge, we will step on the gas and we will continue to drive and expand that traction.”