By Bryan Salvage, Editor
A Truly Impressive Career
In 1948, a tall 16-year-old started working on the "extra gang" for a company known then as Geo. A. Hormel & Co.
"I did the work nobody else wanted to do because I was the lowest guy on the totem pole," Richard L. Knowlton tells Meat Marketing & Technology. "But I didn't care what the job was; I did what I was told. I felt that I was the luckiest guy in town." Forty-seven years later, in December of 1995, Knowlton retired as chairman of Hormel Foods Corp.-the highest spot on that totem pole.
Knowlton was not the first member of his family to work at Hormel; his father, Lyle, worked at the Austin plant in the livestock receiving area where he scaled all of the hogs that were bought at the company's livestock stations.
In 1951, Richard Knowlton began working as a salesman for the company.
"I would spend every summer while in college [University of Colorado] taking salesmen's territories while they were on vacation," Knowlton says. "That was a great experience for me. In those days, you collected a lot of cash and did the balance sheets, and added all the claims and credits manually. Now, this work is all done by computer."
After graduating from college, Knowlton started working full time for Hormel as a salesman based in Denver.
Several years later, he entered the military and became an intelligence officer in the Air Force's Strategic Air Command. Covering the eastern half of the former Soviet Union was one of his major assignments. Who would have guessed at that time that Knowlton and Hormel would host Russian President Boris Yeltsin at Hormel's Wichita, Kan., plant during Yeltsin's 1992 U.S. tour.
"That was a great experience," Knowlton says. "He was terribly interested in our plant. He had so much respect for what we were doing. He talked candidly about the shortcomings of their system and the fact that they couldn't get their products to the marketplace before they spoiled."
After the military, Knowlton returned to Hormel as merchandising manager at its Fremont, Neb., plant. In 1959, he became a sales manager for the Midwest and moved back to Minnesota. His sales area expanded, and he soon was covering half of the country. Knowlton was ultimately appointed general sales manager for meat products.
"While I was sales manager of the Austin plant, I was also named assistant plant manager. I coordinated all of that plant's production," Knowlton points out. "Subsequently, I was named general manager of the Austin plant. The old plant was nine floors high, and it covered 54 acres under one roof."
This, Knowlton says, was one of his most satisfying jobs.
"We made that old plant profitable for five straight years," he says. "In fact, the old Austin plant was our best profit contributor for several of those five years."
Subsequently, Knowlton was named vice president of operations, which included oversight of all company plants as well as the beef and pork operations.
In 1974, Knowlton was named to Hormel's board and he served on it for the next 21 years. Fourteen of those years were spent as chairman. He also served as company president from 1979 to 1992, and CEO from 1979 until 1993. Joel Johnson, who joined Hormel in 1991, presently holds all three top spots at the company.
Architect of success
Thanks to Knowlton's foresight and strong leadership, Hormel is enjoying its 13th consecutive year of record financial success. Sales passed the $3 billion mark for the first time in fiscal year 1994, but the road to success was far from being smooth.
Around 1980, existing problems in the American meat industry were starting to take their toll. Many packing and processing plants were becoming obsolete; many companies continued to utilize the decades-old, commodity-oriented philosophy in marketing perishable products; and many meat companies were simply not catering to consumer demand.
"Meat companies were selling products to a consumer who no longer existed, and there were a lot of commodity products in that mix," Knowlton points out. "Industry was not envisioning the kinds of products consumers wanted-products that were perceived to be healthy and convenient. It seemed abundantly clear to me at that time that we had to change the way our company was doing business."
Revolutionary thinking
In order to achieve and maintain this success, Knowlton instituted revolutionary changes in the company's structure and business strategies-and the company began to greatly diversify its products beyond meat offerings.
A greater premium was placed on strengthening and modernizing marketing activities; business functions were reorganized into comprehensive units; and new technologies were incorporated into plants and business operations. At the same time, the company targeted being the low-cost producer-but not the low-cost labor company.
"We reorganized the company dividing it into clear and separate functions," Knowlton stresses. "During this time, we were also going through challenging financial times. We borrowed almost as much as the total market value of the company.
"We were building new plants [including Hormel's multi-million dollar flagship plant in Austin] and closing old ones," he notes. "Many of our employees were entering our pension program, which needed funding. And we were beginning to redirect and invest more resources into R&D and advertising, which was minuscule at that time. For example, our total advertising budget in 1980 was only $17 million. It was $185 million in 1995."
At the same time, many leading meat companies were being purchased, while some went out of business.
"When I came into the business, Swift was No. 3 in the 'Fortune 500,' Armour was No. 7 and Wilson was No. 10," Knowlton points out. "Hundreds of meat companies have since either become smaller entities of larger conglomerates-or they no longer exist." Hormel stuck to Knowlton's plan and evolved from a meat company into a food company.
"Our mission statement is: 'To be a leader in the food field with highly differentiated, quality products that attain optimum share of the market while meeting established profit objectives.' We made the words highly differentiated come alive," he says.
Indeed, the company did. Today, Hormel sells a wide range of products including its traditional Spam, as well as relative new-comers like the Dinty Moore and Kid's Kitchen lines of shelf-stable microwaveable entrees and Mrs. Paterson's Aussie Pie-just to mention a few. Dinty Moore has 52 percent of the total market in its category.
"We received an award in 1989 from Forbes magazine for being the most innovative company in the food industry, and we were against some heady companies" Knowlton notes. "During one 18-month period, we introduced 240 new products."
To further reflect its new overall food strategy, the company changed its name to Hormel Foods Corp. in 1992.
Major challenges
Creating a new company environment was certainly a major challenge. Surviving-and even prospering-during the Austin plant strike between 1984 and 1986 that was waged by the local union over necessary wage reductions that were already in place by most competitors was another, Knowlton says.
The Austin plant not only refused the best contract in the industry, he adds, but it demanded a sizable salary and benefit increase.
"If you remember, the international union said [Hormel] had the best wage package in the industry," he notes. "Our new main plant in Austin was replete with all the latest technology.
"[Strike organizers] thought that plant constituted such a large part of our company that they could exert enough pressure on us to get what they wanted [by attempting to shut down the Austin plant]," Knowlton adds. Hormel survived this strike by processing a limited amount of products in Austin-while increasing production of products at its other union and non-union plants.
Some of those plants were in operation six or seven days a week. Company officers communicated constantly with their employees about the situation.
"We wanted everyone at our company to understand that our survival was at hand," Knowlton points out. "It has since been written in several books that if we had given into the demands of the union, we would have been insolvent in about a year-and-a-half.
"By understanding the severity of the situation, everyone responded positively," he adds. "As a result, we ended up with a record volume and financial year during the year of the strike."
When asked how things were today at the Austin plant, Knowlton tells MM&T: "Things are wonderful. During fiscal year 1994, the Austin plant received the Governor's Award of Honor by the Minnesota Safety Council for the third year in a row-as well as the council's Governor's Award.
"It has the best safety record-[seven-tenths of one percent] of lost-time injuries per 100 employees in 1994," Knowlton says. "It has extremely low absenteeism-about 2 percent. In terms of efficiency and technology, there's not another meat processing plant like it in the country."
What's next?
Forget any notions that Knowlton will spend the rest of his life fly-fishing in a beautiful Colorado stream.
Upon his retirement from Hormel's board, Knowlton was elected chairman of the Hormel Foundation. The foundation was established by Jay Hormel-son of company founder George Hormel-with the intent that it maintain a controlling stock interest in Hormel Foods Corp.
"I'm also serving on quite a number of outside boards [Mayo Clinic, Supervalu, First Bank System, Northwest National Life Insurance Co. and Horatio Alger], which is something I wouldn't do while I was active as Hormel's CEO," he says. "Occasionally, there's some misguided group that wants me to speak to a food industry group," Knowlton adds with a chuckle. "I still give industry presentations, which I enjoy."
He also plans to remain busy with his hobby-architecture.
He and his wife, Nancy, have already built one home in Indian Wells, Calif., and will begin building another home in Vail, Colo., this spring.
"Both homes are unique, and they're fun to build," Knowlton says.
Knowlton hopes to be able to attend some industry conventions in the future to catch up with old friends.
"Nancy and I miss some of our friends," he says. "We have made some great friends along the way-both in the retail and meat industry."