Hormel Hits a Home Run, at Least in the Media

Sometimes a story is so irresistible that the media can’t stay away from it, even if it’s not much of a story.

Spam
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Consider the following scenario:

A. The U.S. is hit by a seeming economic downturn;
B. The costs of basic goods like fuel and food begin to rise;
C. And so consumers flock to a cheap, old-fashioned staple to sustain themselves.

What’s the staple? Spam.

Spam, of course, has its legacy. Remember Chuck Yeager‘s “Spam in a can” line from The Right Stuff? Remember this exhaustive and wonderful Spam FAQ? Remember when a computer plague came along that was so toxic that it was called Spam?

I recently noticed a spate of news articles, like this one, about how Spam, the affordable meat-in-a-can, is making a big comeback in light of higher food prices:

Spam’s maker, Hormel Foods Corp., reported last week that it saw strong sales of Spam in the second quarter, helping push up its profits 14 percent. According to sales information coming from Hormel, provided by The Nielsen Co., Spam sales were up 10.6 percent in the 12-week period ending May 3, compared to last year. In the last 24 weeks, sales were up nearly 9 percent.

That sounds impressive, doesn’t it — an increase of more than 10 percent? Even though, as the article points out, the price of Spam has risen slightly more than overall food inflation. Then comes this interesting bit:

The Austin, Minn.-based company, also known for the Jennie-O Turkey Store, has embarked on its first national advertising campaign for the 71-year-old brand in several years. They’ve credited the sales increase to that, along with new products like individually packaged “Spam Singles” slices. Also helping sales, executives said in an earnings conference call, was the fact that people looking to save money are skipping restaurant meals and eating more at home. … Hormel began its national advertising campaign, including print and television, for Spam in January. Neufeldt said such campaigns are planned in advance and it wasn’t tied to perceived weakness in the economy.

So we are asked to believe that a) more people are buying Spam because, according to Hormel, people are eating at home more to save money and that; b) they are turning to Spam because it is a good deal (even though, as pointed out above, its price has risen just as much as other foods). In other words, we’re being asked to believe that we are in a recession and that Spam has come to the rescue.

Whereas, in fact, the 10 percent increase in Spam may well be the result of nothing more than an ad campaign — which, considering that advertising ROI can be extremely weak, may mean that Hormel ends up having lost money on each additional can of Spam it sold.

The good news, however, is that seemingly every media outlet in America carried a story about the spike in Spam sales, which is pretty fantastic free advertising. So even if Hormel didn’t really hit a home run last quarter, maybe they will this quarter. Better yet, maybe that was Hormel’s strategy all along?

Whoever wrote the Hormel press release that produced all that coverage should definitely get a piece of the profits — and not just a few extra cases of Spam.


Lee

It will be interesting to compare the sales growth of SPAM in the continental USA with that of Hawaii and other Pacific Islands where it is almost a staple. It may be considered a poor substitute to regular meat products but it is prized in other countries for consistency and texture. There are also additional uses of SPAM being promoted by Hormel including the "spamburger" which makes it easy for kids to make their own sandwich and get away from the e. coli scare from burgers. This convenience might also account for the increase in sales.

di

How are canned tuna and hot dogs doing? I'll bet they are next.

For many people, growing up on a tight budget meant SPAM, tuna casserole, hot dogs and boxed orange macaroni and cheese, store brand bologna.

Thus the feeling of being poor attaches to these foods. So people feeling poorer now may reflexively turn to these foods because they signify "budget" whether they are actually cheaper or not.

Also, no matter how cheap canned meat is, it's still meat. No matter how little money people had when I was a kid, they wouldn't serve beans. That would mean you were *really* poor. I'm sure there are people who wouldn't be caught dead not putting meat on the table every night.

luke

just did some looking around at prices, and spam doesn't really save over tofu or tvp. fancy that. vegetarian products FTW.

Dustin

There's a new book out about the pink perfection. Check out thebookofSPAM.com for your meat fix of the day.

Brooke

If people were really serious about finding cheap sources of good protein, you'd think tofu might catch on. A pound of it sells for less than $2 in a lot of places, and if you spend a little time learning how to cook it, it's an affordable, healthy substitute.

I'm a voracious carnivore, but these days, I keep a couple packages in the fridge. Cooking it up with some hot sauce and a marinade doesn't take long at all.

James

Perhaps the convenience of Spam (it doesn't require refrigeration or defrosting and will last indefinitely) outweighs the extra cost.

Business & Media Institute

The media angle has focused on Spam sales as a sign of recession because it has a reputation of being cheap. But Spam is more expensive than many fresh meats.

http://www.businessandmedia.org/articles/2008/20080530090549.aspx

Ian Ferrel

"Even though, as the article points out, the price of Spam has risen slightly more than overall food inflation."

I'd be interested to know how the price of Spam has changed in comparison to the price of other _meats_. Spam probably doesn't serve as a replacement good for food in general. It serves as a replacement good for unprocessed meat.

Clayton

My Journalism professor said that companies that advertise through recessions/depressions, even if they lose some money up front, always end up making large profits. Maybe that is what's happening here?

K

SPAM - so delicious. If you julienne it and pan fry, it develops a yummy dark crust, spicy inside. Kind of like pork belly, or thick bacon. Lardons. Cube it up and put on salads, use to flavor stews. Oh yum.

maya

Spam may be to the rescue in the short run, but in the long run, Spam or spamlike products are arguably inferior goods that actually may cause psysiological harm to users.

Leland Witter

Hmm - "Spam Singles" sounds a lot like many of the junk emails I receive.

Elizabeth

I think the reason email junk is called spam is not because it is toxic, but rather because it is overwhelming, like in the Monty Python skit (Spam! Spam! Spam! Spam!).

Michael Kriskey

"Spam or spamlike products are arguably inferior goods that actually may cause psysiological harm to users."

Unrelenting negativity and over-seriousness may cause psychological and physiological harm, too.

the Gooch

You may want to talk trash about SPAM, but if you were to ever visit the SPAM Museum in Austin, MN, you'd change your tune.

Down with Anti-SPAMmers!
Up with meat-like canned substances!

Toni

Spam has never crossed my lips, but in reading how it, as well as other "processes meats," are made, Spam is actually near the top, quality wise.

But when I think of Spam, all I keep picturing Graham Chapman in drag.

Erik Teutsch

All of a sudden I want a Spam and Velveeta sandwich - on Wonder Bread of course!

Andree

My family owned a grocery store in southeast Louisiana for over 70 years. I worked there in high school and college and noticed that there was a Spam rebound effect after hurricanes. Any time there was a hurricane in the gulf, customers would stock up on Spam and similar canned meat products that required no refrigeration. After the storm, (whether it impacted our area or veered off to other regions) canned meat products enjoyed increased sales for a period of weeks. There are many possible explanations for this sales rebound, but I like to think that people "forgot" how much they enjoyed these foods, and after the storm, routinely added canned meats to their shopping list.

Drew

What I find most interesting is that as the price of Spam increases, the more Spam people buy...this sounds a little like a Giffen good (inferior quality, substitute good for expensive meats and restaurant meals, etc.). [This, of course, assumes that the advertising campaign is not the cause of the increase in sales.]

Obviously, after rigorous analysis, I'm willing to bet that it turns out to not be one...but you never know. Of course, a "guest Freak" has already found a Giffen good in China.

Al V.

When I was a kid, my Dad and I would eat SPAM when we went camping, because it didn't require refrigeration. That was the only time I ever ate it.