Hormel plans to invest $200 million in its supply chain over the next three years in a move to transform and modernize the company.
The CPG is using the funds to convert its Barron, Wisconsin plant into a “value-added” facility to support its brand portfolio. While the plant currently operates turkey harvest manufacturing lines, this production will end in fiscal year 2024 as part of a plan to simplify the company’s supply chain, CEO Jim Snee told investors during the Q4 earnings call.
"These actions support a more demand-oriented and optimized turkey portfolio that is better aligned with the changing needs of our customers, consumers and operators, while further decreasing exposure to commodity volatility," the CEO said in the call.
The CPG's investments not only support the Wisconsin plant transformation, but tech investments as well. These investments include end-to-end planning capabilities and software to further its data and analytics capabilities, as well as adding headcount to support the plan.
The company has also reduced its inventory levels, ending this year at $1.7 billion, a decrease of $36 million from the start of the year, CFO Jacinth Smiley said on the call. This followed Hormel's move to slow manufacturing in areas where supply exceeded demand during Q2.
Supply chain disruptions have been an issue for the company, causing it to lower its pork and turkey outlook. In September, Hormel’s third-party logistics provider shut down, which led to shortages, increased incremental logistics costs and elevated inventory levels.
The CPG now must deal with the reemergence of the bird flu, though the company doesn't expect supply impacts to the degree it did in the first half of fiscal year 2023, Smiley said. Hormel does expect further financial pressure in the next year, however, due to the uncertain outlook of its turkey segment, the CEO added.
