Hershey and Campbell splurge big on better-for-you acquisitions

Discussion
Photos: SkinnyPop; Cape Cod
Dec 19, 2017
Matthew Stern

When customers think Hershey, they think chocolate. But that could change as the company undertakes an acquisition of a snack company famous for crunchier fare.

In a stock deal valued at $1.6 billion, including $600 million in debt, Hershey agreed to purchase Amplify Snack Brands, the owner of Tyrrell’s potato chips, Oatmega whey protein bars and, most notably, SkinnyPop popcorn.

According to a Hershey press release, Amplify’s brands “compete in many attractive food categories that are capitalizing on fast-growing trends in snacking with a focus on better-for-you products that deliver clean, simple and transparent ingredients as well as unique flavors and forms.”

Building on its recent acquisitions of Brookside Foods, Krave Jerky and BarkThins chocolate, Michele Buck, Hershey’s president and CEO, said the acquisition “is an important step in our journey to becoming an innovative snacking powerhouse as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle.”

Also on Monday, Campbell Soup agreed to acquire Snyder’s-Lance, the owner of Snyder’s of Hanover pretzels, Cape Cod potato chips, Kettle Chips and Pop Secret, for $4.87 billion.

Denise Morrison, Campbell’s president and CEO, said the acquisition will enable the company to deliver “an even greater variety of better-for-you snacks” to consumers. She added, “The combination of Snyder’s-Lance brands with Pepperidge Farm, Arnott’s and Kelsen will create a diversified snacking leader.”

Both deals will be the largest for each company to date. With the heritage of both being in not-so-nutritious categories that are facing growth challenges, the deals deliver a broader foothold for each in the faster-expanding healthy snacks category.

USA Today speculated that Campbell could bring Snyder’s-Lance products closer to the center aisle where it dominates, while Hershey may be able to broaden SkinnyPop’s reach from grocers into big box retailers and, with an emphasis on single-serving packs, to convenience stores. Similar acquisitions by General Mills, Kellogg, Conagra Brands and Nestle in younger, healthy food companies also suggest that changes may be coming to food aisles.

DISCUSSION QUESTIONS: What do you see as the primary motivation behind the Hershey/Amplify and Campbell/Snyder’s-Lance mergers? How do you see the consolidation of young, better-for-you brands into “Big Food” brands affecting grocery shelves?

Braintrust
"Brilliant. Calculated. Deliberate."
"I re-checked the oxymoron dictionary and found that “healthy snack” was still up there with “jumbo shrimp” and “unbiased opinion.”"
"“better for you” is not — and never has been — the same as “good for you,” which is what many consumers are actually looking for."

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13 Comments on "Hershey and Campbell splurge big on better-for-you acquisitions"


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Camille P. Schuster, PhD.
BrainTrust

Snacking has been a popular activity and shows no sign of slowing down. With an increase in diabetes and eating more but smaller meals, adding companies that offer snacks with less sugar and/or fewer carbs makes sense for the future. Not all of the acquired products fit this category so there is definitely room for innovation. However, these acquisitions put both companies in a good position for the future if they use the acquisitions as a platform for creating what consumers want.

Dave Wendland
BrainTrust

Brilliant. Calculated. Deliberate.

These acquisitions by Hershey and Campbell signify a movement afoot in the industry to broaden the appeal, reach and portfolio of traditionally dominant players into categories that are trending among shoppers. The “better-for-you” and “free from” phenomena are here to stay. Unilever, Nestle and others have made similar decisions to acquire rather than create. I foresee much more of this in the coming year.

Bob Amster
BrainTrust

The answer is in the phrase “fast growing trends.” The health trend is not going away and owning a synergistic (food) asset that capitalizes on that trend, makes business sense. The consuming public won’t know who owns either brand.

Sterling Hawkins
BrainTrust

Health isn’t a trend; it’s a new normal. Hershey and Campbells are taking a smart step here to stay relevant. Most important is that they hold true to the brands they’re acquiring so consumers can continue to trust them.

Gene Detroyer
BrainTrust

Both are good business decisions from an M&A point of view. When a company can use its strengths and increase its scope, it almost always turns out well.

From a “healthy” point of view for the consumer, it is awful. Anything healthy will be turned into something less so in order to increase the volume. Forgive my cynicism, but this has been the MO of all these types of acquisitions. The big companies can’t help themselves. Their mission is never health over revenues.

Brandon Rael
BrainTrust

The Hershey/Amplify and Campbell/Snyder’s-Lance mergers are brilliant moves, as they can only help to improve the marketplace perception to a more positive, customer and health consciousness-first go-to-market strategy. Additionally, the consumer expectations today are all about trust, transparency and honesty as it pertains to the product’s ingredients, ethical sourcing and overall holistic health.

Both Hershey and Campbell will also benefit significantly as with these younger, better-for-you brands it will only help their evolution to more organic, healthier overall product offerings.

As a portfolio and diversification strategy, both mergers enable a good/better/best assortment strategy. The Hershey and Campbell brands will have their very loyal followers, however, via these acquisitions they now have acquired a new, savvy, empowered and healthier consumer who wants the right products for their family.

Ryan Mathews
BrainTrust

The primary motivation is that both companies are in categories that are under siege from the forces of anti-sodium, anti-sugar, etc. I think what may be being overlooked here is that, “betterfor you” is not — and never has been — the same as “good for you,” which is what many consumers are actually looking for.

The market for high salt, high sugar products is, quite literally, dying, so I think these companies might have explored more creative ways to expand their portfolios. As to what happens when big companies buy smaller companies, history seems to suggest that we will begin to see line extensions that favor the product profile of the acquiring company at the expense of that of the acquired. These looks to be acquisitions to buy share and sales, not really transformative strategies.

Max Goldberg
BrainTrust

It makes sense. Snacking is huge. Hershey and Campbell want to participate. Rather than develop their own products, it’s faster and more efficient for them to buy established snack brands.

Stuart Jackson
BrainTrust

Consumers are becoming more health-conscious by the day. In 2015 a poll found that 41 percent of Generation Z were willing to spend more for healthier food, but only 16 percent of people over the age of 70 agreed.

Last year, online U.K. grocer Ocado reported a huge 1,678 percent increase in sales of food in its vegan category over the previous year. Plus many more people are removing certain foods such as gluten and dairy from their diet altogether because of allergies or food intolerance. Over the next few years I think the grocery store aisles are going to change dramatically — especially once lab-meat comes into the mainstream.

Up until recently, local wholefood stores selling niche brands were the only places you could find many of these “better-for-you” items. The big brands are only just catching on to the size of this market, and because they’re behind the game, their only option is to acquire the most profitable challenger companies. This is a trend that’s set to grow exponentially.

Jane Sarasohn-Kahn
Guest

Most consumers now enter the grocery store with “health” on their minds with growing food-as-medicine intention. So all FMCG players are looking to bake health into offerings, and these acquisitions bolster Campbell’s and Hershey’s health halos. Still, consumers are increasingly food and nutrition savvy, and many very small players are doing a great job growing market share for niche healthy food products. This is not lost on either big company, so we’ll see more of this consolidation among them looking for more healthy food in their portfolios.

Dave Wendland
BrainTrust

Well stated, Jane.

Richard J. George, Ph.D.
BrainTrust

No doubt the heritage brands for both of these two great companies are on the back nine looking at the clubhouse. In the case of Campbell, this acquisition in concert with other recent non-soup acquisitions, will reduce soup to slightly more than 25% of its revenues.

The common denominator of both of Campbell’s and Hershey moves into these spaces is the popcorn component. In particular, SkinnyPop maybe one of the hottest food brands in the market today. It is a brand that started in 2010 was sold by the original owners to Amplify in 2014 for $320 million. A year later an IPO by Amplify created a total value of the company of $1.35 billion. Now Hershey paid $1.6 billion less than two years later.

These snacking categories, for reasons noted in the article, continue to grow and reposition both Campbell and Hershey on the first tee of this new game.

James Tenser
BrainTrust

I re-checked the oxymoron dictionary and found that “healthy snack” was still up there with “jumbo shrimp” and “unbiased opinion.” The Hershey and Campbell acquisitions are good business moves, no doubt, but they are really about maintaining shelf presence and distribution power, not improving consumers’ dietary well-being.

When big packaged foods companies see their anchor brands are losing relevance for changing or younger consumers, it makes sense to add trendier brands to the mix. But this adds go-to-market complexity along with share-of-wallet. “Better for you” is certainly on trend, but “better for business” is a complex equation. Just please don’t re-formulate my Snyders pretzels!

wpDiscuz
Braintrust
"Brilliant. Calculated. Deliberate."
"I re-checked the oxymoron dictionary and found that “healthy snack” was still up there with “jumbo shrimp” and “unbiased opinion.”"
"“better for you” is not — and never has been — the same as “good for you,” which is what many consumers are actually looking for."

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