Strategic Acquisitions: Driving Growth in the Snack Food Sector

Recent acquisition trends in the snack food sector

Recent acquisition trends in the snack food sector highlight strategic moves by key players. Mondelēz has expanded its portfolio with acquisitions like Give & Go and Chipita, while General Mills focuses on growth in relevant categories. PepsiCo emphasizes building scale in snacks, indicating a robust investment strategy across the sector.

"Mondelēz already has delivered strong growth in cakes, pastries and other baked snacks through its April 2020 acquisition of Give & Go, the leading manufacturer of frozen-to-fresh brownies, cookies, cupcakes and related bakery products in North America, and its January 2022 acquisition of Chipita Global SA, a high-growth leader in croissants, baked rolls and related snacks, focused in Central and Eastern Europe, with increasing expansion to additional markets." --- (MDLZ, press release, 2024/09/20)

"And the acquisitions, I won't get into very specifics, but I will say that they'll probably be either in categories or currently intertangential categories, particularly big global categories we participate in, whether that's pet food or bars or snacking or food service, which is a big business for us, looking for accretive to growth, but where we have a right to win, but also looking at divestitures because more is not always better." --- (GIS, conference, 2024/05/29)

"And this has been an area of investment for us now for a few years, both in snacks and in beverages and trying to build scaled businesses in most of the markets where the scale in terms of population and profitable growth." --- (PEP, earning call, 2024/Q1)

"The acquisition expands our global snacks bar business and complements our refrigerated snacking and performance nutrition bar portfolios." --- (MDLZ, press release, 2024/04/30)

"With regard to M and A, we received about 20 percent of our portfolio, both acquisitions like Blue Buffalo and like the Pet Treats acquisition from Tyson as well as Edgar and Cooper, so a lot in the pet space, but also TNT Crunch business, which is our part of our foodservice segment, but also divestitures." --- (GIS, conference, 2024/05/29)

Impact of acquisitions on market share and financial performance

Acquisitions in the snack food sector have positively impacted market share and financial performance. Mondelez and Hershey reported exceeding market share expectations, while PepsiCo emphasized resilience and ongoing gains. General Mills highlighted M&A as a driver for shareholder value through increased dividends and share repurchases, showcasing the financial benefits of strategic acquisitions.

"Let's review market share performance on Slide 12. We had or gained share in 40% of our revenue base with strength in Chocolate as well as in Gum and Candy." --- (MDLZ, earning call, 2024/Q1)

"I think you said that in general, it came in underlying, right, excluding the ship ahead, kind of in line with your expectations, but that your market share exceeded your expectations." --- (HSY, earning call, 2024/Q1)

"But I would say the consumer is very resilient everywhere else. And our teams, I think, are pivoting to maintain our brands top of mind in their baskets at the frequency that we want and continue to gain market share. So, this" --- (PEP, earning call, 2024/Q1)

"You see that with procurement, you see in operation, but you also see in marketing on us being able to have more efficiencies of how we go to market improving the return on investment." --- (KHC, earning call, 2024/Q2)

"through M and A, we're more than happy to keep increasing our dividends and execute on share repurchases, which also creates shareholder value." --- (GIS, conference, 2024/05/29)

Innovation and product diversification through acquisitions

Strategic acquisitions in the snack food sector are increasingly focused on innovation and product diversification. Companies like Kraft Heinz emphasize ongoing investment in innovation rather than relying solely on promotions, while others like Hershey and Mondelez highlight their commitment to enhancing product offerings and marketing strategies to drive growth.

"We -- I think we have been saying all along, and we continue to stick to this that we believe that's the way we want to grow the business is not through over relying on promotions and rather continue to invest behind our innovation, our renovation and our market investments." --- (KHC, earning call, 2024/Q2)

"And we had -- we had good new product innovation last year. We had the top-five new products." --- (GIS, earning call, 2024/Q4)

"We are seeing some stabilization as we lap some of the consumer concerns in that category and we continue to feel good about the stepped up innovation opportunities on SkinnyPop as well relative to flavor pack size and also marketing investments, which we have dialed up more recently as well in combination with lapping some of the softness from last year." --- (HSY, earning call, 2024/Q2)

"We remain encouraged by our activation plans in key products such as Oreo, TDP expansion, and growth channels as we move through the year." --- (MDLZ, earning call, 2024/Q1)

"We're applying that to our innovation as well too. So that we can say, we're going to launch with a product, but we're not going to also stop there." --- (KHC, conference, 2024/05/30)

Challenges in integrating acquired companies

Integrating acquired companies in the snack food sector presents significant challenges, including high integration costs, as seen with MDLZ's $1 million in Q2 2024 and $10 million in Q2 2023. Companies like GIS emphasize the need to effectively scale innovations while facing competitive pressures, complicating integration efforts.

"The company incurred acquisition integration costs of $1 million in the three and six months ended June 30, 2024, and $4 million in the three months and $10 million in the six months ended June 30, 2023." --- (MDLZ, press release, 2024/07/30)

"So even though there's a lot more innovation in the ecosystem, the key is for our tapping into it and then our ability when we see something really like to acquire it and scale it effectively." --- (GIS, conference, 2024/05/29)

"Could you maybe talk about the challenges and general plans and prospects for improvement for each of those?" --- (KHC, earning call, 2024/Q1)

"(8) Acquisition integration costs and contingent consideration adjustments include one-time costs related to the integration of acquisitions as well as any adjustments made to the fair market value of contingent compensation liabilities that have been previously booked for earn-outs related to acquisitions that do not relate to recurring employee compensation expense." --- (MDLZ, sec filing, 2024/Q2)

"It's our share position, particularly as we look at Pillsbury that has been the challenge and after many years of remarkable growth, this past year, we saw a return of private-label to shelves some smaller competitors, but mainly private-label." --- (GIS, earning call, 2024/Q4)

Future acquisition strategies in the snack food sector

Future acquisition strategies in the snack food sector will focus on enhancing productivity and leveraging external partnerships. Companies like PepsiCo emphasize reinvestment in digitalization and sustainability, while Kraft Heinz highlights successful collaborations to access top-tier capabilities, indicating a trend towards strategic alliances and targeted investments.

"So we feel good about the flywheel in Europe. But at the center of that is a very strong productivity, cost discipline and reinvestment strategy that is, in a way, what we're trying to do across the full company, elevating our productivity and driving their investments both into affordability, availability, a better brand equity and then investing back into our future, digitalization and sustainability at the center of that investment." --- (PEP, earning call, 2024/Q1)

"The company seems to have been more successful than other companies across the packaged food space, partnering with outside companies to tap into best of breed capabilities." --- (KHC, conference, 2024/05/30)

Consumer trends influencing acquisition strategies

Consumer trends significantly influence acquisition strategies in the snack food sector. Key factors include the shift to at-home consumption due to financial stress, the demand for innovative and functional products, and tailored pricing strategies in emerging markets. Companies are adapting to these trends to enhance market share and drive growth.

"And if I could just sneak in from the at-home versus away-from-home consumption globally, as you see some of the weaker trends from the lower income consumer, are you seeing any acceleration in that shift, which might be helping your business on a global basis as well?" --- (PEP, earning call, 2024/Q1)

"I would say that overall, it was in line with our expectations. However, our market share did exceed expectations and our strength was really driven by very strong performance in seasons both overall and takeaway as well as market share and also the strengths that we had in innovation with Reese's Caramel, which not only did well with consumers, was the best innovation in the category and also was able to drive strong merchandising for us, particularly as we launched around Super Bowl." --- (HSY, earning call, 2024/Q1)

"And so, combine the consumer perception with consumers are stressed financially right now, you see the rise in credit card debts and so forth." --- (GIS, conference, 2024/05/29)

"And in emerging markets where because the way we implement pricing, which is a lot of price pack architecture, so playing with the sizing of the packs, consumer doesn't necessarily" --- (MDLZ, conference, 2024/06/04)

"So, I wouldn't overread into the short-term of the category. I would try to think about this as a consumer needs energy, if we're able to provide energy in a consumer friendly way, including price, probably as you mentioned, but I would say functionality, clean labels, I mean like a lot of the things that I think the categories been working on, there should be a good runway for that segment of the category, and it's been value creating for a lot of us that participate in it, including the retailer partners and the brand owners." --- (PEP, earning call, 2024/Q2)