Strategic Acquisitions: Fueling 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 through acquisitions like Give & Go and Chipita, while General Mills focuses on growth in relevant categories, including pet food and snacks, indicating a trend towards targeted, accretive acquisitions.

"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 on market share and financial performance

Strategic acquisitions in the snack food sector have positively impacted market share and financial performance. Companies like Mondelez and Hershey reported exceeding market share expectations, while Kraft Heinz emphasized innovation and pricing strategies. General Mills highlighted M&A as a driver for shareholder value, and PepsiCo noted gains from attracting new consumers.

"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)

"And in the U.S. and North America for all, is really driven by this balance between us driving this innovation, renovation of our brands, truly be more thoughtful about the value that we're creating with consumers in terms of the better products, the better ideas that we're bringing to market as well as being thoughtful on how we are going to spend on our revenue management tools -- spread our revenue management tools in order for us to make sure that we're having the right price gaps in the intended fashion across the branded competitors." --- (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)

"And it's been bringing incremental consumers to the brand and help us gain share now." --- (PEP, earning call, 2024/Q1)

Innovation and product diversification through acquisitions

Strategic acquisitions in the snack food sector are driving innovation and product diversification. Companies like Kraft Heinz and General Mills emphasize ongoing product development and successful new launches, while Hershey and PepsiCo highlight the importance of meeting consumer needs through diverse offerings, showcasing a commitment to growth through strategic initiatives.

"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)

"And we had -- we had good new product innovation last year. We had the top-five new products." --- (GIS, earning call, 2024/Q2)

"And no doubt looking back at the last few years, we'll continue to move that diversification forward, but that does give us some flexibility on sourcing." --- (HSY, earning call, 2024/Q1)

"I think it's a consumer need that will continue to be there and whether we are able to satisfy that through multiple options, that will continue to grow." --- (PEP, earning call, 2024/Q1)

"named one of the world's Top 50 Most Innovative Companies by Fast Company. But more importantly, we are expanding the choices we offer our consumers so that they don't have to sacrifice, whether it's providing greater value through multipacks, plant-based options such as our newly released NotCo Mac & Cheese or expanded the choices in our iconic brands such as Zero Sugar Heinz Ketchup." --- (KHC, earning call, 2024/Q1)

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. Companies like GIS emphasize the need to effectively scale innovations while facing competitive pressures, particularly from private-label brands, complicating market share retention.

"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)