By Kristen Leigh Painter
The (Minneapolis) Star Tribune
AUSTIN, Minn. — Hormel Foods Corp. is purchasing Planters for $3.35 billion, the largest acquisition in the Minnesota food company’s 130-year history.
Kraft Heinz agreed to sell the well-known nuts and snack mix business as it continues to shore up a struggling balance sheet. The Chicago-based food company undertook a nearly $17-billion write-down in the value of its brands in 2019.
Meanwhile, the Austin, Minn.-based food company — known for its conservative bookkeeping and down-home style of business — has been steadily gobbling up smaller protein-centric food brands for the last five years.
The Planters’ price tag obliterates all its previous deals. The most Hormel previously paid for an acquisition was $850 million for the deli meat brand Columbus in 2017.
“The acquisition of the Planters business adds another $1 billion brand to our portfolio and significantly expands our presence in the growing snacking space,” Jim Snee, Hormel’s chief executive, said in a statement.
It’s the latest move by Hormel in its ongoing effort to transition from a commodity meatpacker into a branded food company.
The company, which has just under $10 billion in annual revenue, remains exposed to the ups and downs of the commodity market, with its lower margins and unpredictability.
The Planters nuts business will bolster its portfolio of branded products, which already includes Skippy peanut butter, Dinty Moore soup and Justin’s nut butters that garner higher margins.
Hormel has plenty of challenges with the line of snacking nuts, which straddle the line between a pure commodity and a value-added product.
Commodities are raw agricultural products that are often more vulnerable to generic or store brand competitors.
Kraft Heinz’s new CEO has set the company on a path to simplify its portfolio of processed food brands — like Jello-O, Velveeta and Oscar Mayer — that have been losing favor with many American consumers as they seek fresher, more natural products.
The company is hoping to sell off brands in an effort to focus and innovate on fewer products with better profits.
The company is the result of an infamous 2015 merger that won the praise of Wall Street and temporarily upended the entire packaged food industry with its austere zero-base budgeting method.
But those glory days were short lived. The model, championed by Brazilian-American 3G Capital, is predicated on cutting rather than growing, as a way to expand profits.
But 3G quickly realized the model wasn’t going to work as well in the food industry as it had in beer. Kraft Heinz was losing revenue faster than its peers and Wall Street began to question the long-term viability of the approach.
Then came the 2019 write-down and federal investigation. Since then, the company has hired new leaders and is looking to innovation for its salvation.
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