Governor Tim Pawlenty In China--Beijing Hormel Foods

Hormel built a meat processing plant outside of Beijing in 1995. Some of us toured the building.

It's a striking facility with meticulously maintained grounds (unlike other nearby factories). Built to USDA standards, which are obviously much more stringent than Chinese ones, the foods processed here include hotdogs, bacon products, ham products, cold cuts, fresh pork products and a few beef, chicken and turkey products. Hormel's decision to stress "safe, wholesome product" has certainly paid off in recent years, given animal disease outbreaks and new food safety demands from Chinese consumers.

Hormel "introduced" the Chinese to hotdogs. To do that, the company gave away lots of free samples at grocery stores and community events, and ran ads like these:

A pack of Hormel hotdogs costs $1.99 in China. The same pack is $3.99 in the U.S.

The company also decided to become an official sponsor of the 2008 Beijing Olympics and is an "official designated supplier" of food to the athletes.

How about that processed meat Olympic torch?!

Hormel's China story was inspiring to those of us on the tour and should be to any Minnesota business wanting to get a piece of the Chinese action. Beijing Hormel now supplies all the pizza topping to Pizza Huts (which are hugely popular with the Chinese), and meats to other chains like Subway. Besides other major food service contracts, the company now has meat products in almost every grocery store that has a refrigerated case. The company also exports products from China to Japan.

How Hormel is creating a market for products brand new to the Chinese is fascinating. For example, Hormel bacon products are more expensive than any other brand. Besides stressing food safety, the company runs ads touting something like, "After all that studying after a hard day at school, doesn't your child deserve the best? Buy Hormel bacon." The company's target market is the Chinese middle class, those age 25-54 who make about $650 a month. An average factory worker makes $100-120 a month. Hormel calculates that right now only 100 million Chinese out of $1.3 billion qualify as middle class.

The company has faced other unique challenges:

• Black is a predominant color in Hormel U.S. packaging. However, black is a "bad" color to the Chinese, so it was replaced with a "clean" green.
• 90% of Chinese hog farmers own less than ten hogs and they feed them household scraps, meaning the pork isn't remotely up to Hormel's standards, so the company has to run its own hog operations,
• The percent of households that own refrigerators and/or microwaves is somewhere in the single digits.
• Given its products are refrigerated, keeping "the cold chain" in distribution has been difficult. Hormel was one of the first companies to bring refrigerated trucks to China.
• China lacks adequate patent protection. Like other companies, Hormel's packaging is frequently imitated by other companies.

Besides selling the incorporation of existing Hormel products into Chinese cuisine, Hormel created new products like spiced chicken ham and "Sichuan Spicy Sausage." Here are some more Chinese Hormel ad photos:

For Hormel, like other U.S. companies, increasing the buying power of the Chinese is the Holy Grail.

We got to check out the plant floor operations (sans cameras, of course). Everyone had to put on white robes, face masks, hats and plastic bags over our shoes. Then we were "de-linted" with wands. We also had to step into sanitizing pools before entering the plant.

What an incredible operation. Almost all of Hormel's processing in U.S. plants is automated. In China, the work is all done by human hand. Picture an assembly line. Whole (degutted) hogs are dropped one-by-one from a hanger onto a table. Then several people quarter it with a big saw machine. Onto the conveyor belt the pieces go and each rib is cleaned and cut by hand by one set of workers. The pork loins are separated by another, then hams are cut, the pork bellies are skinned (which was by a funky-looking skinning machine) and the bellies are then cut into slabs of bacon. At my count, there were 30-some Chinese workers reducing whole hogs to their constituent food parts. From start to finish, it takes about 10 minutes to completely process a hog.

In other parts of the facility, workers were doing things like casing sausages, vacuum packaging the different cuts of meat, bagging chunks of hog meat in wire mesh bags, and hand-sorting chicken parts. The latter came in bulk to the floor (the chickens were processed elsewhere).

All of this in a hyper-sanitary environment with a room temperature just above freezing and barely a discernible smell of anything.

Hilariously-and maybe to resolve anyone's queasiness about eating pork after seeing how it was processed-we emerged from the plant to the smell of frying bacon in the break room. Here's the sampling table (with apologies to Hormel's vice president of government affairs, Joe Swedberg, for only capturing the back of his head):

We were all quite surprised to see guards in uniform at the Hormel gate and scattered around the grounds.

I was shocked when I walked by and the guards actually saluted me. Turns out the guards are mostly for show, and the salute is a sign of simple respect. In China, the companies with good reputations all have guards. Mostly ceremonial, the guards are for image and perception of importance. The greater the number of guards, the greater the importance intended and respect expected. Hormel had about 20 guards, which seemed like a lot for the size of the building and the grounds. [That's the same number they have every day, not just when VIPs come to the plant.]

So, show Beijing Hormel some respect. The company has definitely earned it.

One of the most fascinating people on the trip is Su Ye, who is the Minnesota Dept. of Agriculture's director of market research and the delegation coordinator for the food, agriculture and renewable energy delegation. Ye was born and raised in Beijing where her father served as a general in the Chinese air force. She came to Minnesota to get a graduate degree in agronomy at the U of M, met a nice Minnesota man and stayed. Besides running the ag delegation (like her father the general), Ye has offered incredible insight on China and Chinese culture. [That's Su Ye providing the guard explanation, above.]

Here is another Ye insight. Someone asked her to describe the power of the Chinese government. Ye thought for a moment, and gave this answer, "After the SARs outbreak, when the government decided to put all SARs patients in one place, the government built a hospital in five days. Five days! From designing the hospital, to breaking ground, to getting the materials and labor, to finishing the building. Five days." [The former SARs hospital is now a resort-like hospital for the diseased and handicapped.]