Hormel sees more growth in China

By Brad Dorfman

CHICAGO (Reuters) - Hormel Foods Corp. (HRL.N: Quote, Profile, Research, Stock Buzz) is looking for ways to attract middle-market consumers in China as it seeks growth there, the chief executive of the company said on Monday.

The company's success in China and with a joint venture in the Philippines has so far been by selling to restaurants and other food service suppliers, Jeff Ettinger, CEO of Hormel, said at the Reuters Food and Restaurant Summit.

But the company, which makes Hormel Chili, Dinty Moore stew, Spam processed pork and other products, is looking at ways to grow its sales to consumers in retail outlets like supermarkets.

"If we want to be a significant player in China, we need to figure out how, ourselves, to connect with the middle market in China," Ettinger said.

Hormel has two pork processing plants in China, which have capacity to absorb more business, he said.

The company had initially expected large retailers to expand in China, giving it outlets to sell its products. But instead, the food service market became a more attractive venue.

Now, with Wal-Mart Stores (WMT.N: Quote, Profile, Research, Stock Buzz) adding more supercenters in the country, Ettinger hopes Hormel will be able to grow its consumer business.

"We're a major Wal-Mart supplier in the United States and there's no reason we can't follow that kind of entity around and supply products," he said.

Hormel is looking for "value added" products that meet the lower prices consumers in China can afford to pay, Ettinger said, adding that he did not know if that would be under the Hormel brand or a local brand.

Asia is an area Hormel also would look to make acquisitions, Ettinger said.

"We have been willing to invest in on-the-ground assets in Asia. If we were to look at something (outside the United States) it would be in Asia or North America," he said.

Inside the United States, Ettinger declined to comment on whether the company was interested in buying ConAgra Foods Inc.'s (CAG.N: Quote, Profile, Research, Stock Buzz) lunch meat business, which ConAgra said last month it planned to divest. Those brands include Eckrich, Armor and Butterball.

Hormel shares were down 33 cents at $33.71 on Monday afternoon on the New York Stock Exchange. The stock trades at about 17.5 times estimated 2006 earnings, a bit higher than the 17 times multiple posted by the Dow Jones U.S. Food Producers index .DJUSFO.