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Last October, the company, formerly known as Kellogg's, took a new name and a new future, spinning off its popular cereal brands and pivoting into a snack-focused business.
Ten months later, Kelanova is headed toward a new future, joining candy brands like Snickers and Twix in a $35.9 billion deal to buy the maker of Pringles.
In an interview with Food Dive, Kelanova CEO Steve Cahillain said that Mars CEO Paul Byrauk called him for lunch earlier this year and pitched the idea of acquiring the Cheez-It maker.
“It was a series of meetings over the next few months, talking about it over and over again until we got it right,” Cahillane said. “It was a compelling industry argument about the complementarity of their business and ours from a brand and category perspective, and from a geographic perspective.”
Kelanova believes the acquisition will help it expand its product portfolio into the front of grocery stores and gas stations, where Mars dominates candy and gum, as well as expanding its presence in new areas.
Cahillane said Mars has a much bigger presence in China, and Kellanova sees it as particularly beneficial for brands with a weaker presence in China, such as Pringles, because of the candy giant’s go-to-market expertise. Kellanova, on the other hand, has a bigger presence in Africa, while Mars does not.
“When you think about all the Snickers and M&M’s we can put into the system to help that brand, it makes sense again,” Cahillane said. “That combination is very compelling.”
The vision of combining the two businesses also reflects the snack giant's robust innovation pipeline, which has led to a number of product launches in recent years, including Cheez-It Puffed and Pringles-flavored Morningstar Farms plant-based chicken fries.
If Mars and Kelanova were to merge, the combined company would be able to experiment with a variety of flavors and formats, including a variety of candies, snacks, and even plant-based meat products.
“People in our company very quickly started talking about M&M Pop-Tarts,” Cahillane said. “And all sorts of innovations that could come from combining the brands.”
Cahillain — He joined Kellogg as CEO in 2017 after decades of executive roles at companies like Coca-Cola, Anheuser-Busch InBev and Nature's Bounty, and says he wants to take the snack giant to Mars. Kellanova He tries to maintain the momentum before he steps back and decides what to do next.
Twix is one of the most popular candy brands owned by Mars.
By the grace of Mars
Confidence in a harsh anti-monopoly atmosphere
Kelanova expects Mars to have no trouble getting regulatory approval despite the Biden-Harris administration’s aggressive antitrust push.
Cahillane reiterated that the only area where the two businesses overlap is the snack bar category: Kellanova produces RXBar and Special K, while Mars owns Kind bars.
“I don’t think it’s going to be a problem, but we’ll be working very collaboratively with regulators to explain exactly how we see the situation,” Kellanova CEO said.
The Mars-Kellanova deal is not without its critics. Amanda Starbuck, research director at Food & Water Watch, predicts that the merger could result in higher consumer prices during a period of high food inflation.
“While processed food giants will continue to increase their profits by dominating the snack market, American consumers will suffer through higher costs and fewer healthy options,” Starbucks said in a statement. “The Biden-Harris administration has pledged to rein in food monopolies. The Federal Trade Commission must step in and block this destructive corporate merger.”
Some experts speculate that the merger of Mars and Kelanova could lead to further consolidation in the food and beverage industry.
TD Cowen analyst Robert Mosco said in a note to investors Wednesday that Kelanova's portfolio could benefit from Mars' leadership, particularly internationally.
Moscow recalls the last major food industry acquisition spree in the late 1990s and early 2000s, when General Mills bought Pillsbury, Kraft bought Nabisco and Kellogg bought Keebler.
But there are downsides to M&A deals of that scale, says Moskow. “Many of the remaining large food companies today have trusts or family members with significant controlling interests, which poses a hurdle for potential buyers.”
