Issue: Hormel has trouble expanding into upscale food
Commentary by: David
Today, Steven Gray at the Wall Street Journal details Hormel’s difficulty expanding its brand into fast-growing niches including healthy and ethnic pre-packaged food. In spite of a solid product and innovative technology, (using high-pressure pasturization instead of preservatives to keep food bacteria free by literally squeezing the bacteria to death) Hormel has struggled to overcome its longtime association with Spam, the difficult-to-characterize almost-meat which is still popular in certain regions and among certain populations in the United States. Adding to Hormel’s troubles is the worry that premium food offerings will alienate core Spam consumers.
It is understandable that Hormel is seeking new markets and new consumers. There may be great reasons for a food manufacturer to diversify and serve more than a narrow slice of the consumers in the grocery store. There may even be operating efficiencies and negotiating advantages to selling more to existing customers (supermarkets and mass merchandisers). There is absolutely no reason, however, to sell these products under the Hormel name, and this advertising blog finds itself somewhat confounded that Hormel would try. Selling premium packaged meats under the Hormel name sounds a lot like bottling wine and slapping a ‘Budweiser’ label on it to us.
Hormel’s problem is simple – its brand will not extend to the new consumers it would like to serve. The solution – creating new brands to narrowly target ethnic food consumers or healthy consumers – should be obvious to any second-year MBA student. But we chose to comment on this issue because it demonstrates a common problem with seat-of-the-pants marketing efforts where most of the brand development work is put behind product and packaging.
Had Hormel spent some time and money carefully considering brand implications of its proposed expansion, it would likely have chosen to build new brands instead of risking the Hormel name. But this kind of work is often lost in the frantic excitement of new product development outside of a handful of disciplined consumer companies like Procter & Gamble. Instead, new product teams choose the seemingly risk-adverse path (using the established brand Hormel to launch new products) to avoid the immediate failure often associated with launching new brands. Instead, these brands end up creating a bigger disaster by endangering the franchises they are built upon as well as failing after launch.
Launching successful new products requires careful brand planning as well as strong product execution. Without the former, the best product in the world will not save the brand – as Hormel has learned.