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  • 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 everywhereat 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 strongHormel 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 disputedone

  • 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 upresearch 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.