Jim Sheehan signed a deal this year to acquire Planters from Kraft Heinz for more than $3 billion. He is retiring after 43 years with Hormel.
Mr. Sheehan is retiring at the end of the year after more than 40 years with the company. CFO Journal talks to the finance giant about pork, mergers and acquisitions, and maintaining a strong balance sheet.
Here are edited excerpts of the conversation.
Businesshala: How did you get to Hormel?
Mr. Sheehan: I intended to go into public accounting with a firm in Kansas City. When I graduated from college, Hormel was coming to campus. I liked what I heard from the company. He offered me a trip to Austin, Minnesota. I got a week to accept the offer from Hormel, but I was still waiting for my offer [accounting firm], Finally, on the last day my offer expired, I got a call [from the accounting firm] Saying that all their offers are lost and they will send me the offer by express next week. By that time, I had already accepted Hormel’s offer. I called my mom and said, “Should I go back?” And he said, “No. You’ve got the job. You get there.”
Businesshala: What were the most important steps in your career?
Mr. Sheehan: One of the most important tasks I ever had was president [Hormel subsidiary] Which made the go-to wrappers on things like pepperoni and sausage. You really had to run the business. It wasn’t particularly big, but you had to be the one who set the strategy and approved your plan and then executed the plan. It was a business that had been very profitable and had lost its way. My strategy was to improve the business and sell it. [Note: Hormel sold the subsidiary, Vista, for $43 million in 2004.]
Businesshala: How to become a CFO?
Mr. Sheehan: I believe the most important skill set you have is to understand the business and understand the industry. A CFO Generally Understands [a sector] From a financial perspective, whether that skill set comes from a classic accounting background or from the treasury sector. You see individuals who have industrial relations experience, this is another great approach to the CFO role. That’s why I’m not a believer that there’s a classic path to CFO [that] It used to happen. Early in my career, you started out as an accountant, then you worked your way up to the controller and then you automatically moved into the CFO role. The responsibility of the CFO is much broader than it was at the time.
Businesshala: How has the role changed?
Mr. Sheehan: I believe the CFO’s role has expanded because of the speed and volume of information. Previously, much of the information a CFO dealt with was financial information. It looked mostly backward. [Today], the speed of information is high. You should be able to see ahead. It is a lot that is about to happen, not what has happened.
Businesshala: What was it like before?
Mr. Sheehan: We relied not only on the Excel spreadsheet, but also on how different companies used it and found information. So in the turkey industry, they were looking at their plans differently than either the pork side of the business or the processed-food side of the business. Information comes from many different systems and is being generated in many different ways. [that] It was not reliable. Those were the things we brought together and said, we’re going to get information from the same source. There’s going to be a version of the truth from a financial standpoint.
Businesshala: How has Hormel changed during the last 40-plus years?
Mr. Sheehan: When I walked in the door, we did $1 billion in sales for the entire year. now we are [$11 billion] worth selling. So what we traded in a year, now we do in four weeks. When I got into the business, we were a meat company. We sold a lot of pork and we sold some chili and stew and Spam. There wasn’t much money in the pork industry. It was a tough business and we started turning that meat company into a consumer-goods company, and that’s good. We closed a lot of pork processing plants and turned that effort into more value-added businesses.
Businesshala: You acquired the peanut butter brand Skippy in 2013.
Mr. Sheehan: I think it was very important for the company, because now we had a brand that had nothing to do with meat protein. After all, the Planters acquisition was a big step forward. This company’s biggest investment outside of the meat category may have surprised some of the CFOs and CEOs I grew up under. it shows how far this business is [has come], where a significant portion of our input cost has nothing to do with meat.
Businesshala: What else is on Hormel’s shopping list?
Mr. Sheehan: We love the snacking category. We love the food-service industry. We are interested in making more international acquisitions. But we are not going to shift our focus to our growing wealth. For us, it’s not about the new shiny toy you buy and forget about everything else. It’s about that new acquisition that’s additive to your strategy and the shareholder return you provide.
Businesshala: How do you see the current deal making environment?
Mr. Sheehan: We Spent Over $3 Billion [on the Kraft Heinz deal], But I financed a $3 billion loan at an average interest rate of 1.6%. We still have a very strong balance sheet and very strong cash flow. As you look at Hormel, it’s made for a really long duration.
Businesshala: How did you manage Hormel’s finances during the pandemic?
Mr. Sheehan: Gone are the days when we used to look at our cash flow every couple of hours. We never thought we’d be fine because we had a strong balance [sheet], We always wanted to see what would happen if it went bad. We borrowed a billion dollars, not because we needed the cash, but because I didn’t know that six months later [we would be] able to borrow.
Write Nina Trentmann at Nina [email protected]