Hormel Foods CorporationHRL

Superior brand recognition and convenient value-added products allow Hormel to introduce new products and to charge higher prices for its products than its meat processing peers.

Hormel's vertically integrated supply chain allows for scale efficiencies that keep new entrants at bay.

The company's steady growth in economic booms and busts as well as its history of increasing its dividend every year for the past 47 years makes Hormel a good investment.

The acquisition of the Skippy peanut butter brand should give Hormel a platform from which to grow its international business. Skippy is a leader in China (where it generates around $30 million in sales) and several other regions; a larger international revenue base could make Hormel a more attractive partner to international retailers. Read more 

Spending on product innovation and marketing support will be necessary given intense competition between firms in the industry, which could challenge the company's short-term competitive advantages in the longer term.

Surging price inflation for soybean and corn commodities could dramatically increase Hormel's feed costs and pressure margins.

The negotiating leverage of retailers has increased at the expense of packaged meat companies and could make raising prices even more difficult for Hormel in the future.

Management's willingness to extend beyond its core meat business (as evidenced by the acquisition of Skippy) could result in execution stumbles if it is unable to recognize competitive differences around the grocery store. Read more