This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.

Ah, Spam. Doesn't the word make your mouth water? Or maybe not. Either way, Spam must be given its due. It is the most famous of the mystery meats, those exciting concoctions of the meat-packing industry. It has been sold by the billions of cans since its invention in 1937. It helped feed the Allies and win World War Two. It is central to a Monty Python skit about Vikings in a greasy spoon, and now a Broadway musical. It provides a name for unwanted e-mail. It theoretically lasts forever. And it is a product of the Hormel Foods Corporation (NYSE: HRL).

Spam is made in several places, but its ancestral home and main production facility is in Austin, Minnesota, sometimes called Spam Town. Austin is the small town south of Minneapolis that is home to Hormel, proud maker of all things Spam. (I should note that Hormel would prefer that we write "SPAM luncheon meat" but I don't think we'll take that suggestion too seriously.)

Hormel has long dominated the town of Austin, and not just because the Spam Museum is located there. It is by far the largest employer in town and the majority of workers in Austin work for Hormel, producing many of the company's meaty foods. Hormel's roots in the town go deep. Drawn by the town's good rail and river access, George A. Hormel opened a meat packing business there in 1891, and his small company eventually grew into the billion-dollar colossus that today owns a dizzying array of food brands, from Chi-Chi's and Valley Fresh to Dinty Moore and, of course, Spam. (Does it seem fair that one company gets to own both Dinty Moore and Spam?)

In tough financial times, certain food products and food preparation ideas seem to gain increasing favor with consumers. People try to find ways to prepare nutritious and interesting meals while gaining greater purchasing power from their hard-earned dollars.

Just the other day, some of us bloggers were engaged in a lively email chat regarding some of our tried-and-true strategies for stretching our grocery dollars. As you can guess, ramen noodles almost immediately took center stage. I was entertained with stories of the many ways that the slender pasta can be made quite appealing. For instance, if you take any brand of chunky salsa, cut it 50% with water, add a sliced hot dog and pour the heated mixture over the noodles, it's really a very delicious and satisfying meal.

As the discussion ebbed, I couldn't help but be amazed that no one had mentioned SPAM, by Hormel Foods Corp. (NYSE: HRL). Surely, I thought, these people must know about the illustrious history of SPAM! Could they ignore the fact that SPAM has carried literally millions of people though hard times since prior to World War II? Though there is probably a ratio of three SPAM jokes to every one SPAM recipe, the fact remains that Hormel's SPAM, in all its variations, still sells exceptionally well. It sells even better as times get tough, as indicated by a recent Associated Press overview.

The Associated Press reports that Spam sales are on the rise. Cans of Spam -- a pig byproduct -- are flying off the shelf as consumers are turning more to lunch meats and other lower-cost foods to extend their already stretched food budgets.

As I posted, consumers are going on a recession diet. I had not thought of Spam as a way to play this trend. But its sales are up 10.6% and its manufacturer, Hormel Foods (NYSE: HRL) has seen its profits rise 14%. But the price of Spam is up more than Hormel's stock, with the average 12 oz. can costing about $2.62. That's an increase of 17 cents, or nearly 7% from the same time last year.

Despite rising prices, Spam seems like a good alternative to consumers. AP quotes Kimberly Quan, a stay-at-home mom of three, who has been feeding her family more Spam in the last six months as she tries to make her food budget go further. "It's canned meat and it's in the cupboard and if everything else is gone from the fridge, it's there."

With the markets still in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio. With the aforementioned in mind, Hormel Foods is worth an evaluation.

Hormel Foods (NYSE: HRL) is a diversified producer of consumer foods. A processor of the now universally known "spiced ham" product -- SPAM -- Hormel is also a top U.S. turkey processor and a major pork processor, including the Jennie-O turkey, Cure 81 hams and Always Tender fresh pork brands.

In general, analysts expect 5-7% revenue growth for Hormel for FY2008, with an adequate performance from its grocery division, with pricing power offsetting lower volumes.

Meanwhile, refrigerated foods should outperform expectations in FY2008, with widening margins; specialty foods demand probably will be flat.

Maybe the first indication should have been when Whole Foods Market, Inc. (NASDAQ:WFMI) declined to carry Hormel Foods Corporation (NYSE:HRL)'s fresh meats products: the King of Processed Foods might have an image problem when it started taking preservatives out of its foods.

Spam® is such an icon of preserved food that it has its entire own sub-culture, with everything from spamku to Spam cookbooks. Google's Gmail serves up Spam recipes instead of ads when you click on the spam (email) folder. Hormel's blue collar customer base adores Spam and the company's other ingredient-packed products, from chili to "deli" luncheon meats. But in fact, "shelf stable" meats have declined from nearly 20% of the company's sales in 2003 to 16.3% in the year ending October 30, 2005. Now making up the majority, 54%, of the company's sales are perishable meats -- although these include everything from the higher-quality, less-processed varieties the company wishes to become known for to the old standbys, from Hormel pepperoni to Little Sizzlers sausages to Jennie-O hot dogs.

A story in the Wall Street Journal [subscription required] this morning highlights Hormel's desires to become a healthier company, which have included innovations in preservation (High Pressure Pastuerization, develped by Washington's Avure Technologies, Inc.) and a raft of new product introductions like the Natural Choice deli meats -- the ones Whole Foods wouldn't stock. The question: if Whole Foods won't take the company seriously as a provider of natural meats, will anyone else? And will the company's loyal customers stand for it?