Every year in Hawaii, thousands of people take to the streets to
celebrate an unlikely hero Spam.
At Waikiki's Spam Jam Festival, you'll find Spam curry, Spam corn
dogs, candy Spam and, of course, Spam musubi.
Spam musubi is a slice of grilled Spam on top of a block of rice, all
wrapped with nori. In Hawaii, they're everywhere — at convenience
stores, in kids' lunch boxes and on the menu at restaurants.
I always say Spam and rice are like made in heaven, because rice is
just plain, and then when you hit the flavor of the Spam, the
correlation is really, really good.
Spam is so important in Hawaii that some say it's even become a form
of currency, leading some retailers to keep Spam behind lock and key
in plastic cases.
In Hawaii, Spam isn't just a canned meat.
It's a big part of history and played a role in the island's economy
as an inexpensive source of protein.
Spam packs 42 grams of protein into one 12-ounce can that retails for
$2.79. But, times have changed, a lot, since Spam was introduced by
Hormel Foods in 1937. Changing consumer tastes and competition from
new brands has made packaged food products a competitive market.
Some legacy brands are feeling the squeeze as consumers pick less
processed foods.
In this landscape, some packaged food giants have sold off less
profitable and usually older, brands.
Yet Spam stays strong — Hormel reported that Spam had its fifth
consecutive year of record sales in fiscal year 2019.
Consumers know Spam as a highly processed product.
The shelf life of an unopened can of Spam is disputed — one
researcher told us it's indefinite, but Hormel says its shelf life is
three years. A can was even found still intact in the deepest place
on Earth. So how has Spam kept growing as consumers look for
healthier foods?
First, let's take a look back at its history.
Hormel Foods Corp.
started out as a meat processing company in 1891.
It was founded in Austin, Minnesota, which is still the company's
headquarters and the site of the Spam Museum.
In the 1920s and 30s, there were lots of canned foods available to
consumers, but not many canned meats.
Meat was usually purchased, fresh or cured from the butcher shop.
Hormel was at the mercy of fluctuating meat prices and seasonal
production that led to big worker layoffs.
Company leadership wanted to solve some of those problems, so Hormel
started canning meat.
Hormel developed the first canned ham in 1926, which was sold by the
slice in butcher shops.
The products were a success, so successful, in fact, that other
companies copied Hormel's canned ham.
So the company wanted to develop a product that could be sold
directly to consumers, but making a smaller version of the canned ham
presented difficulties.
They called it the "Battle of the oose juice" and they spent months
working on it. And finally they figured out that not only did they
have to have a vacuum in the can, but they also had to mix the pork
shoulder and ham in a vacuum.
And that's what solved the problem.
When it was finally introduced to consumers in 1937, Spam had five
ingredients: pork with ham, salt, water, sugar and sodium nitrite.
Hormel's only tweak to the recipe was to add potato starch, which
researchers say was to lessen Span's gelatinous texture.
Right away, consumers embraced Spam as a lunch and breakfast meat
eaten at home. The first year Spam was out, 1937.
there were about 17 percent of the country was buying it.
And by 1940, 70 percent of urban Americans were buying Spam.
While it was popular in the supermarket, Spam really gained
prominence on the battlefield.
The U.S. military needed a source of protein that didn't require
refrigeration. And it found Spam.
Pork luncheon meat was high on the government's food procurement
early on because it was nutritious, filling, affordable.
The canned meat distributed to troops wasn't always brand name Spam,
but Hormel's product gained a certain reputation during the war.
Spam became one of the most used and verbally abused foods of the
war. Soldiers called it, "Ham that didn't pass its physical", and
"The real reason war was hell."
American soldiers introduced Spam around the world, delivering it to
people in war torn countries facing food shortages.
Hormel shipped up to 15 million cans of meat per week overseas during
the war. Many of the countries that ate Spam during World War 2 still
eat Spam. Today
the five biggest markets for Spam are the United States, South Korea,
Australia, the United Kingdom and Hong Kong.
In some countries like the Philippines and South Korea, Spam quickly
became a part of local dishes like Koreans stew budae jjigae and
musubi. For generations that lived through the conflicts, Spam could
be a painful reminder of hard times.
Some Japanese Americans were introduced to Spam in internment camps.
That's where many Japanese Americans first experienced Spam.
And after the end of the war, many continued eating it.
Experts say Spam hasn't played a big role in Chinese diets
historically, but Hormel saw a big business opportunity there.
China is a relatively new market for Hormel, which started operations
there in 2017.
Spam brand managers say the growing middle class and existing
affinity for canned lunch meat made it a target for business growth.
In 2017, Hormel opened a plant in Jiaxing, China, to produce meat
products, including Spam, primarily for Chinese consumers.
And in 2019, Hormel stepped up advertising there to counter fierce
competition. We have a lot of competition in the international
markets, which is just mind blowing.
International sales of Spam have grown over time.
Analysts say Spam has high growth potential, especially abroad.
The international business has slowly and steadily continued to grow.
Hormel has added flavors like Chorizo, Tosino and Portuguese Sausage
Seasoning to appeal to international palates.
Today, there are about 16 varieties of Spam.
Hormel says classic less sodium and light are the top three around
the world. Part of Spams appeal with consumers is that it embraces
its nostalgia. It just hasn't changed all that much and it's blue and
yellow can is very recognizable.
We're staying true to the iconography that we have.
People want and crave this product.
You may have caught a certain CNBC personality eating Spam on live TV
straight out of the can.
We certainly haven't forgotten it.
It's sold out in seven hours, the whole thing.
You can't get it. Twenty five bucks.
Twenty five bucks on eBay? And I've got one.
You know what?
It's darn good.
What? What? They're showing a close up of you eating it.
For many Asian-Americans, especially in Hawaii, to eat Spam out of
the can without cooking it again, is like unheard of.
Why do I want a faux burger?
How about a delicious tasting thing that is in the shape of a burger?
Or David, this, by the way, can be eaten with pens you don't have to
wait for fork. This is like the Food Channel over here.
CNBC's Jim Cramer.
Tried the limited edition Pumpkin Spice flavor on air, just as the
product was selling out in grocery stores.
It resold online for as much as $25 a can of 456% markup.
Hormel introduces new flavors of Spam regularly, and it's now up to
about 16 varieties.
But as Spam, really an innovative product?
Isn't part of its appeal that it's a little bit nostalgic.
Pumpkin Spice Spam really was more of a novelty item, but more than
that. It's really about the iconic brand Spam and the way it connects
with consumers after over 80 plus years.
I mean it's a great affordable source of protein.
It's very versatile and it's still on trend with so many consumers
today. What Hormel is doing with Spam seems to be working.
For the 52 weeks ending November 3rd, 2019, Spam U.S.
sales were $220 million.
While the company doesn't break out products like Spam every year in
its financial results, we do know that fiscal year 2019 was Spam's
fifth consecutive year of record breaking sales.
For a product that's over 80 years old, that's pretty impressive.
Data from U.S. retail sales backs that up — research firm IRI
estimates that consumers spent over $217 million dollars on Spam in
calendar year 2018 — up 2.8
percent from 2015.
Spam strong international presence has helped build its domestic
growth as people immigrate to the United States.
We've seen growth with both the Asian and Hispanic consumer groups,
which are some of the fastest growing consumer groups in the United
States. Since Hormel doesn't provide exact annual sales numbers for
Spam in its financial results,
it's hard to say exactly how much of an impact that canned meat has
had on the business's bottom line.
But sales from its grocery business, which includes Spam, have been
on the rise since 2004, according to FactSet.
In 2018, grocery sales made up 26.4%
of Hormel's total sales.
Analysts say that despite making up a relatively small portion of
sales, Spam is a great growth brand for Hormel.
Spam is about 90 percent of the market share for canned meat in the
U.S., which means it has little competition.
In the domestic business
we estimate that Spam's only about 4 percent of Hormel's sales so not
hugely significant. But the great thing about Spam, first of all, it
has strong pricing power and part of the brand's strength and it has
huge international appeal too.
And I think that provides a great platform for Hormel to expand their
business internationally.
Consumers are willing to pay a premium price for Spam because it has
strong brand recognition and there just aren't many other options on
the market. Hormel actually raised the price of Spam in the U.S.
in 2019, but analysts say the hike didn't impact sales volume.
And while Spam is an iconic product, it's just one piece of Hormel's
business. The company is making an active effort to attract younger
consumers by striking a balance between legacy brands and on-trend
products. Hormel's management is one of the strongest teams for the
packaged food companies.
They do an excellent job of supporting their brands.
And it's their strong brands actually that we think gives them their
competitive edge.
Hormel is leaning into other brands to deliver healthier, trendier
choices to consumers.
The company recently acquired organic meat brand Applegate Farms and
Justin's Nut Butters.
And, what about the plant based meat trend?
It's one of the biggest fads of 2019 with both consumers and
investors. But Hormel didn't have a plant-based meat line of consumer
products until September 2019.
I mean, everybody knows what's happening with plant based proteins.
That was a trend that we saw coming.
We had actually partnered with another company.
And then when the IPO market hit, that partner said, you know, we
want to try and go it alone.
Instead of buying, we had to build.
Hormel launched Happy Little Plants, which sells plant-based ground
meat in 2019. The company also sells blended burgers, which contain
both animal and plant based protein.
So what about a meat-free Spam?
We always continue to evaluate and want to understand is this a trend
that will work? It would have to be the right fit for us in order to
go down that route.
But we're always constantly looking for new flavor varieties and
trends that we might want to incorporate with the brand.
There's no indication that Hormel will produce the plant based Spam
but experts don't think the rise of plant based meat poses a threat
to Spam. As these sort of healthy or food trends grow.
I think there will always be a portion of the population who is
trying to go against that grain.
As more people want to eat healthy.
You have just as many people who says, screw it, I'm going to eat
Spam. Despite the meatless meat trend, Spam sales are stronger than
ever. Have you noticed more Hawaiian and poke bowl restaurants
popping up in your neighborhood?
It's not just a coincidence.
Hawaiian restaurants are the fastest growing category of restaurant
in the U.S., according to Firefly, a database of restaurant operator
profiles. Since Spam is an essential part of Hawaiian cuisine, the
growing popularity of Hawaiian restaurants is also lifting Spam's
profile. In Hawaii, Spam is 10 times more likely to be on a
restaurant menu than it is in any other metro or state.
This broader exposure that consumers have today to Hawaiian cuisine
is also generating more interest in Spam.
So maybe you don't necessarily try it on every visit to a Hawaiian
restaurant. But you're seeing it on more menus.
Despite the growth of Hawaiian restaurants, it's still pretty rare to
see Spam on a menu. It's on just point seven percent of restaurant
menus in the U.S. Compare that to hot dogs another processed meat.
They're on about fifteen percent of menus in the U.S.,
but the number of menu Spam is on has increased in recent years.
kitschyWhile it's not on a ton of restaurant menus today, it's long
like one percent of menus across the restaurant industry.
It's unique in that compared to other processed meat products, it's
experiencing growth and it's also projected to continue to grow.
Younger consumers are driving Spams growth, despite Gen Z's
preference for organic and natural foods.
Compared to millennials a decade ago, 18 to 24 year olds are more
likely to shop for foods without additives and are more likely to be
vegetarian. But they also prefer meals that are convenient and easy
to prepare. Just like Spam.
Spam had a time in the sun decades ago and then it maybe skipped a
couple generations.
And then now today's teenagers also are saying they love it and it's
something they want to see and include in their diet.
Celebrity chefs and the impact of Instagram on eating out may have
something to do with it, too.
In the past 10 years, Korean American and Filipino American chefs
really have come into the spotlight.
They take in what was seen as by Americans as kitchy and made it into
something like culinary legitimate.
Whether you love it or hate it, there's no denying that Spam's had a
big impact on culture.
It's a product that won't disappear.
Not even a World War could turn consumers against it.
And while experts say some generations fell out of love with Spam,
changing demographics and foodie culture has brought it back.
So just how far can this 80-year-old brand grow with its vast and
diverse group of consumers?
Hormel says pretty far.