Investors should take note of companies that don’t view the competitive landscape before them through rose-colored glasses. Tyson Foods, Inc. (NYSE:TSN) “is structured to withstand adverse conditions.”They know they will experience adverse conditions. As an investor, consider companies that have a foundation in place that helps safeguard somewhat their core businesses – and shareholders – when things get rough.
What about other players in the Meat Products sector? Hormel Foods Corporation (NYSE:HRL), maker of Spam, Stagg Chili, and more is also thinking Mexican flavors. In fact, they have an investment in the MegaMex Foods venture (a 50 percent stake). MegaMex unveiled a line of “Herdez” brand Mexican cooking sauces earlier this year. The Herdez del Fuerte group of Mexico and Hormel Foods Corporation (NYSE:HRL) set up the MegaMex venture a few years ago.
Consider the aggressiveness of this combined venture. The MegaMex Foods venture is looking to grow sales. They’re doing it with Mexican-food product innovation and acquisitions. In 2010,MegaMex Foods acquired Don Miguel Foods; in 2011, they acquired Fresherized Foods.
Moreover, investors should note that Hormel, like Tyson Foods (with their traditional brands that have served them well) are always innovating and aligning new product initiatives to evolving consumers tastes, in this case the trend of many things Mexican – and Mexican sauces pairing well with meat.
With Smithfield Foods, Inc. (NYSE:SFD) investors should look at the recently announced strategic combination with Shuanghui International Holdings Limited. The two companies have entered into a definitive merger agreement This merger’s going to make Smithfield Foods, Inc. (NYSE:SFD) an even greater force in the Meat Products sector.
Shuanghui International is the majority shareholder of Henan Shuanghui Investment & Development Co. Henan Shuanghui is the largest meat processing enterprise in the People’s Republic of China. Smithfield Foods is the largest pork processor and hog producer globally. Investors interested in a taste of food product companies should consider this powerful combination and the massive market opportunity in China that’s now open to those who invest in Smithfield.
Furthermore, Smithfield Foods is also into joint ventures to foster growth. They announced this past February a joint venture with Kansas City Sausage Company, a top American sausage producer and sow processor. Smithfield is looking to build their packaged meats business.
On the global front, Smithfield Foods is ensuring their foreign markets remain with them. The company is focusing on being a foremost provider of ractopamine-free pork (ractopamine hydrochloride is an anabolic substance used as a feed additive). They lead the industry in the production of ractopamine-free pork. China and Russia have said that they will require certification from third parties that any pork they receive is free of ractopamine.
For investors, it’s wise to consider a company such as Smithfield that looks to leverage the strengths of other businesses to build their own business, which is what Smithfield is doing with the Kansas City Sausage acquisition. Even more important for investors to consider is the climate for drug-free healthier meats. Smithfield understands the market demands for meat free of anabolics and such, and now is set to serve the Chinese and Russian markets as per those nations’ demands.
Global meat consumption ebbs and flows; it’s the nature of the industry, and more so in recent years as consumers’ modify their diets to sometimes include less meat. But the line-ups at retail and foodservice tell us meat is here to stay, and so are the companies experienced in negotiating the particulars of this multi-faceted industry.
The article There’s Meat on the Bone With Tyson Foods originally appeared on Fool.com.
Michael Ugulini has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Michael is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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