Dive Brief:
- Post Holdings is buying Perfection Pet Foods for $235 million as the cereal, peanut butter and liquid egg maker increases its presence in pet food.
- Perfection is a leading manufacturer and packager of private-label and co-manufactured pet food and baked treat products. The acquisition includes two manufacturing facilities in Visalia, California.
- Post entered pet food for the first time earlier this year with the purchase of Rachael Ray Nutrish, 9Lives, Kibbles ’n Bits and other pet food brands from J.M. Smucker for $1.2 billion.
Dive Insight:
Just six months after closing the acquisition of its first pet food brands, Post is wasting no time expanding its reach in the category and filling in gaps within its portfolio. Similar to how Post has a presence in cereal with private label that complements its brand name offerings such as Pebbles and Grape-Nuts, the St. Louis-based food conglomerate is paving a similar path in pet food.
While Perfection does not have recognizable brand names such as 9Lives or Kibbles ’n Bits, it will bring meaningful value to Post’s pet food business. The purchase will allow Post to get additional manufacturing capacity to bring more of its pet food production in-house and give it an entry point into the private label and co-manufacturing pet food category that it previously did not have.
By doing more pet food production internally, Post will lessen its exposure to supply chain and other outside challenges beyond its control.
The addition also gives Post a presence with private label, which could be especially valuable in today’s climate where some cash-strapped consumers are moving away from branded offerings in an effort to save money. In addition, Post will add another revenue channel to its pet food division by making pet food for other entities.
The purchase also fits squarely within Post’s M&A playbook. The CPG company has long valued cash-generating businesses. It expects Perfection to contribute approximately $25 million of adjusted earnings before interest, taxes, depreciation and amortization in the year following the close of the deal.
It also will create a tax benefit to Post of about $20 million and reduce future capital expenditures previously earmarked for capacity expansion. The acquisition is expected to be completed late in the fourth calendar quarter of 2023.
