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Hormel Foods buys Applegate for $775m: 'A growing number of consumers are choosing natural and organic products'

By Elaine Watson

- Last updated on GMT

Hormel Foods pays $775m for Applegate prepared meats

Related tags Whole foods Organic food

Hot on the heels of ConAgra Foods' acquisition of natural and organic frozen meal maker Blake's, fellow CPG giant Hormel Foods has parted with $775m to buy Applegate, the #1 brand in the natural and organic value-added prepared meats category.

Under the deal, which is expected to close within 60 days, Bridgewater, NJ-based Applegate will operate autonomously as a standalone subsidiary in Hormel's Refrigerated Foods segment, although "a few new folks"​ from Hormel will join the team, said Hormel CEO Jeffrey M. Ettinger.

“A growing number of consumers are choosing natural and organic products. This deal allows us to expand the breadth of our protein offerings to provide consumers more choice... The Applegate team has built a great brand, and consumers can rest assured there will not be any changes to the way Applegate meats are raised and produced."

Applegate's 2015 annual sales are expected to be about $340m.

Founder:  As much as I hate to admit it, I’m no longer the best person to be at the helm of Applegate  

In a statement​ ​on its website, Applegate explained that founder and CEO Stephen McDonnell suffered a stroke in 2013, adding: "While he’s made great progress in his recovery, he can’t continue to lead Applegate."

Statement from Applegate CEO

"At first glance, Hormel Foods may not seem to be a likely partner to do business with. But I believe that Hormel Foods is buying us because they believe we are doing something right. For years I’ve been saying to anyone who would listen that the Applegate model of antibiotic-free, humanely raised animal agriculture could be scaled up and that the big meat companies should get on board. This is it.​" Stephen McDonnell, founder & CEO, Applegate

However, it insisted that selling up did not mean selling out, adding: "Same products. Same standards. Same mission: to change the meat we eat. The only difference now is that our new partner, Hormel Foods, will offer more opportunity to find your favorite Applegate products in more places. And we’re going to keep pushing to get antibiotics out of the food system and for transparency in GMO labeling."

Applegate: 'If we keep growing as a brand, that will help change the entire meat industry'

Under the deal with Hormel, Applegate will "operate independently, keep our headquarters and staff and continue to maintain and improve our standards​", it added, noting that, "All products will be the same: antibiotic-free, humanely raised and no artificial ingredients."

As for GMOs, "all of Applegate products will be free of GMO ingredients by this summer​", said the firm, which said it would also "continue to look for solutions on getting GMO feed out of our natural meat program".

Teaming up with a larger company was also positive for animal welfare, added the firm, which said the meat and poultry used in its products came from animals that fed a vegetarian grain or grass diet without antibiotics, hormones or animal by-products and "humanely raised on family farms in an environment that allows them to move about freely and exhibit natural behaviors..."

It added: "If we keep growing as a brand, that will help change the entire meat industry."

Click HERE​ to read a statement from Applegate CEO Stephen McDonnell on why he sold to Hormel Foods.

The two parties

Based in Austin, Minnesota, Hormel Foods​' brand stable includes includes Chi-Chi's, Dinty Moore, Farmer John, Herdez, Jennie-O, Lloyd's, Muscle Milk, Skippy, Spam, and Stagg.

The firm, which added Skippy peanut butter and CytoSport to its portfolio in the past couple of years in a bid to diversify, posted earnings of $180m on sales of $2.3bn in the second quarter of fiscal 2015. 

Applegate -​ based in Bridgewater, New Jersey - supplies refrigerated deli meat, hot dogs, bacon, dinner sausages, Half-Time meal kits, chicken strips, Italian meats (salami, pancetta etc), and cheese; fresh pork; and frozen burgers, breakfast sausages, breaded chicken, and corn dogs.

BUYING INNOVATION: Some recent deals in the natural & organic foods arena:

  • CONAGRA FOODS buys Blake’s All Natural Foods (May 2015).
  • DR PEPPER SNAPPLE GROUP buys $15m stake in Bai Brands (April 2015).
  • MONDELEZ INTERNATIONAL buys Enjoy Life Foods (Feb 2015).
  • WHITEWAVE FOODS pays $195m for So Delicious Dairy Free (Sept 2014), invests $3m in Daily Greens (Jan 2015). 
  • HERSHEY buys KRAVE Jerky (Jan 2015).
  • PINNACLE FOODS pays $154m for plant-based protein expert Gardein (Nov 2014).
  • GENERAL MILLS pays $820m for Annie’s (Sept 2014).

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