For the second quarter, the gross domestic product of China grew at a rate of 7.6 percent.
While lower than the average of 10 percent previously and the slowest pace in three years, the economy of China is still expanding and its people are growing more affluent, as a result.
That is bullish for Hormel (NYSE: HRL), the maker of Spam and other products that sell well in China, Asia and emerging markets around the world.
Hormel has been dedicated to China for almost two decades. From the company website, "Beijing Hormel Foods Co. Ltd. (BHFC) began in 1994 with Beijing General Corporation of Agriculture, Industry and Commerce as a joint venture partner.
BHFC opened a state-of-the-art plant in 1998 for the harvesting, manufacturing, sales, marketing and distribution of chilled processed meat products and convenience foods.
Hormel Foods maintains a majority interest in this joint venture. The following year, Hormel Foods established a joint venture with Da-Chang Further Processing Meat Company to form Shanghai Hormel Foods Co. Ltd.
This company manufactures, sells, markets and distributes chilled processed meats for sale in the Shanghai, Guangzhou and Shenzhen regions of China. HFIC holds a majority interest in this joint venture.
The plant in Shanghai opened in 1997. SHFC was named one of the 10 best employers in China and one of 20 best in Asia in 2001."
Hormel also has substantial operations in other parts of Asia such as Japan, South Korea and the Philippines. This growth in emerging markets will continue as the middle class expands.
According to a recent report from The McKinsey Global Institute of McKinsey & Co., the consulting behemoth, "Urban world: Cities and the rise of the consumer class," by 2025, "One billion people will enter the global consuming class..."
Like Yum! Brands (NYSE: YUM), Burger King and McDonald's (NYSE: MCD), Hormel has prospered in China and throughout Asia by adapting its menu to local tastes to sell to the expanding "global consuming class."
For Yum! Brands, the operator of KFC and Pizza Huts, as detailed from the company website, this entails "In addition to Original Recipe chicken, KFC has an extensive menu featuring beef, seafood, rice dishes, fresh vegetables, soups, breakfast, desserts, and other products that appeal to Chinese consumers’ tastes. "
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Source: Argentine Beef Packers S.A.
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