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February 11, 2021

Hormel Foods buys Planters from Kraft Heinz

The deal, struck in cash for US$3.35bn, is part of Hormel's "evolution as a global, branded food company", the Spam owner said.

By Dean Best

Hormel Foods is to pay just over US$3.3bn for Kraft Heinz’s Planters snack-nut business, the two US companies announced today (11 February).

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The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
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Joining brands such as Spam canned meats and Skippy peanut butter, the deal for Planters is a “continuation of the company’s evolution as a global branded food company”, Hormel said.

For Kraft Heinz, the sale of Planters is the company’s latest disposal under CEO Miguel Patricio as the ketchup and soup giant focuses on products it believes have better prospects.

Hormel is buying Planters for $3.35bn, with the company saying a tax benefit of $560m leads to an “effective purchase price” of $2.79bn.

Planters' net sales were approximately $1bn in 2020, Hormel said.

The deal includes three factories – in Arkansas, California and Virginia – and Hormel added it expects to get synergies of around $50-60m by 2024. 

"Planters is an iconic leading snack brand with universal consumer awareness," Hormel chairman, president and CEO Jim Snee insisted. "The acquisition of the Planters business adds another $1bn brand to our portfolio and significantly expands our presence in the growing snacking space."

The sale includes a range of Planters snacks, as well as Corn Nuts branded products. Both companies said the deal is expected to close in the first half of the year.

"This is another momentous step in our rapid transformation of Kraft Heinz," Patricio claimed. "It will enable us to sharpen our focus on areas with greater growth prospects and competitive advantage for our powerhouse brands."

In September, Kraft Heinz sold a clutch of cheese brands, including Breakstone's and Athenos, to French dairy giant Lactalis for $3.2bn.

That disposal came alongside the announcement of a wider "transformation plan" at Kraft Heinz as it seeks to grow more consistently after a period when its financial performance has been in the spotlight and sales had been under pressure.

In October, the company set out plans to cut the number of its SKUs by a fifth going into the new year to try to improve the company's agility, alongside a focus on fewer but more – it hopes – impactful innovation.

Alongside news of the sale of Planters, Kraft Heinz reported its annual financial results for 2020.

Sales rose 4.8% to $26.19bn, or by 6.5% on an organic basis. Prices increase by 3.1 percentage points, with volume/mix contributing 3.4 points of growth.

Kraft Heinz's operating income was down 30.7% at $2.13bn. The company's net income was $356m, compared to $1.94bn in 2019. Profits were dented by the impairment charges Kraft Heinz recorded in 2020.

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Free Report
img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.

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