Hormel Foods Corp (NYSE:HRL) stock hasn’t had a very good year so far. But this major food brand has seen quite a lot since its founding in Minnesota in 1891, so its current travails are a mere bump in a very long road.

There’s no doubt that three quarters of sub-par earnings may be a warning sign for some companies.

But HRL stock has been in a dynamic market this year.

When Amazon.com, Inc. (NASDAQ:AMZN) stepped in and bought Whole Foods Market Inc, it sent a ripple through the entire food industry.

A highly competitive low-margin industry just got even more competitive.

And that goes for the companies supplying the grocers as well as the grocers themselves.

3 Problems for HRL Stock

The biggest challenge for big players like HRL is trying to stay competitive with new trends and new competition, as well as sustaining leadership in the product categories they currently lead.

According to the company, HRL has more than 30 brands that hold the No. 1 or No. 2 spot in their categories. And 81% of households have a HRL product in their home.

But success is earned in this space. And it’s getting tougher.

Another challenge for Hormel this past year has been the strong dollar, even as the global economy slowly regains its footing. HRL products are sold in over 75 countries around the world. That means when all that overseas revenue is converted back into dollars, it shows up as lower revenue if the dollar is strong.

Finally, there’s the transition of tastes in the consumer market. While iconic products like Spam, Hormel canned ham, Skippy peanut butter and Chi-Chi’s salsa have been top products in the past, now consumers are looking for healthy alternatives.

HRL has been making that transition with acquisitions like Applegate all-natural meats, Muscle Milk sports drinks and Justin’s nut butters, to name a few.

That transition will take a while. And in the meantime, investors are a little concerned about the “Amazon effect” and how that will affect this major food companies. Now that AMZN has control of WFM’s generic store brands, it can pressure some of the other players out of the market.

There are already studies coming out showing that AMZN’s price drops at WFM store are cutting into Wal-Mart Stores Inc (NYSE: WMT) and Trader Joe’s grocery sales. WMT is known for riding supplies for every last penny on their products and Trader Joe’s business is based on store labeled products.

There’s no doubt that the retail grocery store space is going through some generational changes. But that’s no reason to count Dividend Aristocrat HRL stock out. It has raised its dividend every year for the past 50 years and it’s not going to stop now.

At this point, Hormel is unloved. That makes it the perfect time to buy if you’re a long-term value investor.

— Richard Band

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Source: Investor Place