Dear fellow shareholders,
In 2015, a shareholder proposal about “gestation crates” in Hormel’s supply chain won a majority of the vote – amongst votes not controlled by The Hormel Foundation – including support from Goldman Sachs, UBS, Morgan Stanley, T. Rowe Price, and others. But today, serious concerns about Hormel’s approach to this issue persist. For context, gestation crates confine sows in solitary confinement where they’re unable to even turn around for months at a time. Although Hormel touts that all company-owned sows are instead housed in groups, it owns just one sow facility; most sows in its supply chain are raised by independent suppliers. And while Hormel says suppliers must meet animal welfare specifications, notably lacking from such specifications are restrictions on gestation crates. This raises significant concerns.
Consider that: in 2002, Florida banned gestation crates and ten more states have since banned or restricted them (see CageFreeLaws.com); McDonald’s, Wendy’s, Burger King, Kroger, Costco, Amazon, Chipotle, Panera, Aramark, Sodexo, and many others have shifted (or are shifting) to group-housed pork; and animal welfare is a reporting topic for Hormel under SASB Standards.(1) Opposing the 2015 proposal, Hormel claimed it had “asked” suppliers to “consider” group housing. Glass Lewis supported the proposal, saying despite Hormel’s own group housing, it lacked “plans for moving the other pig breeding operations throughout its supply system away from” crates. Institutional Shareholder Services (ISS) supported it too. So did BMO Global Asset Management, which said Hormel should “investigate gestation crates and provide more information about this practice as part of reporting on its approach to managing animal welfare in its…supply chain.”
And in 2019, Hormel’s director of pork operations claimed the company was “working” with suppliers “to transition to group housing.” But come 2023, Hormel still lacked meaningful plans. So, another proposal was filed. For its withdrawal, Hormel agreed to “conduct a baseline study” in 2024 to finally investigate and “understand the use and prevalence of group sow housing throughout our supply chain.”(2) Whatever challenges Hormel may claim, consider this: Two decades after states started banning gestation crates, ten years after asking suppliers to “consider” group housing, and five since reportedly working with them to convert, Hormel still didn’t even understand these crates’ prevalence throughout its supply chain – and it took a shareholder submission to finally investigate that. Further, Hormel’s entire supply chain wasn’t even examined, but just that relating to company-processed pigs. And for that segment, it turns out that about a third of sows are group-housed. (By contract, in 2023, a pork industry representative stated over 40% nationwide were.) And Hormel still lacks measurable targets for even increasing group housing in its supply chain. Therefore, we ask shareholders to again weigh in.