When assessing the best, or most significant, food-industry deals of the year there are a number of factors to bear in mind. These essentially relate to the scale of the transaction, the strategic importance to the businesses concerned and an indication of future trends.
JM Smucker’s faith in indulgence
When many of its contemporaries were focusing on the ongoing trend of health and wellness, US food group JM Smucker went in another direction.
The Smucker’s jam and Jif peanut butter brands owner struck a deal in September to acquire fellow US food manufacturer Hostess Brands for around $5.6bn, comfortably the biggest food-industry deal of the year.
Mark Smucker, JM Smucker’s CEO, said buying Twinkies and Donettes maker Hostess was “a unique opportunity to accelerate our focus on delighting consumers with convenient solutions across different meal and snacking occasions”.
However, analysts were divided on the wisdom of the move given the trend toward healthy-living and product re-formulation. And the ever-lurking threat of governments concerned about childhood obesity regulating to limit the marketing and promotion of sugar-laden products.
AllianceBernstein’s Alexia Howard, an analyst covering Smucker, was somewhat downbeat about the deal.
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“While snacking is likely to remain on a higher growth trajectory than meal-based foods, there is the question of whether indulgent snacks will lose out to better-for-you snacking in future years, especially with the uncertain impact of the new GLP-1 weight-loss drugs, which may curb purchases from some high-consumption individuals,” she said.
Post’s pet-food play
JM Smucker was involved in another big Stateside deal earlier in the year when it sold pet-food brands to Weetabix owner Post Holdings for $1.2bn.
The February deal – centred on the brands Rachael Ray, Nutrish, 9Lives, Kibbles’n Bits, Nature’s Recipe and Gravy Train – was significant not just for its size but because it saw Post entering the US pet-food market.
Post CEO Rob Vitale said: “We expect this acquisition to continue our history of creating value with a buy-and-build approach to categories. These iconic brands are ideally suited to this strategy.”
Post made further inroads into the pet-food category later in the year when it acquired private-label specialist Perfection Pet Foods.
Commentary at that point by GlobalData – Just Food’s parent company – revealed Post was already reaping the rewards for its entry into the pet-food category. It pointed out that Vitale told analysts in August that the pet-food margin realisation from the acquisition was already “exceeding expectations.”
Campbell Soup prioritises premium
Another US packaged-food heavyweight, Campbell Soup Co., took a different approach in another one of the year’s major deals – its acquisition of local peer Sovos Brands for $2.7bn.
The August transaction, which we should mention is still under review by the US competition regulator the Federal Trade Commission (FTC) and is unlikely to close until next year, does not take soup and sauce maker Campbell into massively new territory, in terms of the Sovos core range, but may hit a new type of customer.
Campbell described Sovos’ signature pasta sauce brand Rao’s as a “premium, market-leading” brand.
CEO Mark Clouse said: “The Sovos Brands portfolio strengthens and diversifies our meals and beverages division and, paired with our faster-growing and differentiated snacks division, makes Campbell one of the most dependable, growth-oriented names in food.”
Reaction to the deal was mixed.
GlobalData commentators pointed out that Campbell’s management team had a “strategic objective” of growing its sauces business to one that generates $1bn in revenue per year and with the acquisition of Sovos, the company looks set to achieve that goal.”
But analysts at Stifel said they are approaching the growth potential of the new portfolio “cautiously”, amid private-label share gains and an increase in competitive activity.
Mars checks in to chocolate hotel
In a cross-Atlantic deal in November, US confectionery giant Mars bought the UK’s Hotel Chocolat for $662.4m.
Mars expanding its chocolate empire is not that newsworthy you might say.
But this was a deal with a difference because Hotel Chocolat is a retail chain selling up-market chocolate products. Thus the deal provided the Galaxy and Snickers owner with a premium chocolate line and a new delivery channel in one fell swoop.
Andrew Clarke, the president of Mars’ snacking business, said: “We are confident that Mars will be an excellent long-term home for Hotel Chocolat, providing a like-minded, entrepreneurial and purpose-led environment in which to maximise the potential of the Hotel Chocolat brand which is already so beloved by consumers.”
Mark Lynch, the founding partner at UK corporate advisory firm Oghma Partners, said the deal could benefit Mars and Hotel Chocolat.
“It extends Mars offering into the premium segment of the market and strengthens the direct route to the consumer via the own-store network and D2C sales,” he said.
While taking that point on board, Katie Page, content director for GlobalData’s consumer-industry practice, expressed uncertainty about the prospects for the status of the Hotel Chocolat brand.
“If expansion happens too rapidly, will the brand be able to maintain its signature single-estate cocoa sourcing at a much larger scale?” she asked.
Tyson’s creepy-crawly craving
Away from the billion-plus deals, and indeed outright acquisitions, US meat major Tyson Foods was eyeing long-term growth from an unusual source.
In October, it invested in Netherlands-based insect-protein supplier Protix and plans to build a partnership US production facility primarily to serve the pet-food market.
Protix produces ingredients based on insects, not only for pet-food applications but for animal and fish feed.
John Tyson, Tyson Foods’ CFO, said: “Our partnership with Protix represents the latest strategic investment by Tyson Foods in ground-breaking solutions that drive added value to Tyson Foods’ business.”
A Just Food feature from the start of the year quoted a 2022 One Poll survey of more than 8,000 people in the US, the UK, France and the Netherlands revealing 80% of respondents would like to see insects incorporated more widely into food products.
Pfeifer & Langen’s plant-based push
In huge contrast to previous years when there has been something of a feeding frenzy around plant-based food, for much of 2023 the news surrounding this category was mostly of the bad variety, with sales dipping and some manufacturers going under.
So some eyebrows were raised in November when Germany’s Pfeifer & Langen took a majority stake in Rügenwalder Mühle, a traditional sausage maker, which has evolved in recent years to make alt-meat products.
Pfeifer & Langen and Rügenwalder Mühle both have plant-based meat-alternative products in their portfolio and it is the desire to expand in this area that has brought the businesses together.
Uwe Schöneberg, managing partner of Pfeifer & Langen, said: “By joining forces, our mutual strengths can be leveraged, for example, procurement of raw materials [or] in the production of innovative products.”
And for all of the aforementioned bad news, research published in November revealed that more than half of Europeans are reducing their meat consumption.
Could 2024 see a resurgence of plant-based food deals? We shall see.
