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.
did make me want to eat spam... mmm