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Hormel Foods to Boost Offerings With Facility Expansion Plans

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Hormel Foods Corporation (HRL - Free Report) unveiled plans to expand Burke manufacturing facility through investments worth almost $150 million. Notably, Burke, located in Nevada, is one of the leading manufacturers of pizza toppings and other fully-cooked meat products in the prepared food and foodservice arena.

Burke Expansion Likely to Strengthen Brands

Hormel Foods’ latest expansion initiative is one of its major ventures. The expansion will provide an additional area of 210,000 square-feet to the existing facility, which will create more floor space for augmenting production and other operations. This enhanced capacity is expected to aid the company meet the rising demand for pizza toppings and other food products along with creating more job opportunities.

Management stated that the operations are expected to commence in the upcoming months, once regulatory approvals are received. Accordingly, the company expects the work to be completed by early 2020.

Undoubtedly, such initiatives are expected to further strengthen the company’s offerings and brands. In fact, strong brand has been one of the major factors driving Hormel Foods performance. Markedly increasing popularity for products like Hormel Black Label bacon, The Natural Choice, Muscle Milk and Wholly Guacamole dips have been boosting growth. The company is also committed toward making strategic advertisement investments to drive brand popularity.  

Acquisitions are another lucrative mechanism through which the company has been building brand forte. Buyouts of businesses such as Fontanini and Columbus have been yielding and are expected to continue boosting revenues in the forthcoming periods.



Will Growth Efforts Offset Hurdles?

We note that raised tariffs on pork have been negatively impacting the Refrigerated Foods segment. The company expects risks related to multiple rounds of tariffs to be a persistent hurdle for fresh pork exports. Moreover, soft sales at Jennie-O Turkey Store and escalating freight costs are expected to continue dampening performance.

Nevertheless, we expect that the company’s strategic moves to augment brand and portfolio strength will enhance revenues, which will provide cushion to the aforementioned hurdles. In fact, such efforts have been aiding this Zacks Rank #3 (Hold) company to remain in the green. The company’s shares have gained 14.5% in the past six months, against the industry’s decline of 7.8%.

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