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Dive Briefing:
- Candy and gum giant Mars has agreed to buy snack maker KelaNova for $35.9 billion, the biggest food and beverage deal in years since its $45 billion merger with Kraft Heinz in 2015.
- Under the deal, Kellanova, which makes brands including Cheez-It, Pringles, Pop-Tarts and Eggo, will become part of Mars Snacking, joining a portfolio of brands that includes M&M's, Kind bars and Extra gum. The company will be led by Andrew Clarke, global president of the privately held candy giant's snacks division, from its headquarters in Chicago.
- The acquisition is expected to close in the first half of 2025, the companies said in a statement.
Dive Insight:
Less than a year after KellaNova was spun off from Kellogg's North American cereal division to become a standalone company, the multibillion-dollar snack company's days as a standalone company may be numbered.
With annual sales of more than $50 billion in 2023, Mars is best known for its candy and gum, but has expanded into packaged foods with Ben's Original rice and Tasty Bite ready-to-eat Indian meals. It also has a dominant position in pet care through its veterinary chains VCA, PrettyLitter, Royal Canin and Pedigree.
The fact that Mars is acquiring another snack company This is not surprising, considering that Kelanova has been actively pursuing M&A in recent years to diversify its business.
In 2020, it acquired the remainder of Kind, valuing the healthy bar company at about $5 billion. That same year, Mars acquired snack bar maker Nature's Bakery. And in 2023, Mars added Kevin's Natural Foods, a high-growth maker of chef-inspired sous vide meals, sides, and sauces using whole foods and simple ingredients.
By acquiring Kellanova, Mars will add to its portfolio of popular snack brands and well-known plant-based foods from MorningStar Farms. Mars will effectively own the day when consumers can choose one of its products, whether it’s breakfast with Eggo and Pop-Tarts, a midday or evening snack with gum, bars, candy and chips, or dinner with MorningStar, Ben’s Original, Tasty Bite or Kevin’s.
“There is a lot of logic behind Mars' acquisition of Kellanova, as the deal will allow Mars to move more aggressively into the savory snack category, where it is virtually nonexistent. Neil Saunders, GlobalData's managing director, said in a statement before the deal was announced:Salty snack sales are growing faster than sweets, which Mars is currently leading.”
Nonetheless, he added that while Mars could afford such a purchase, the price might make it difficult to “generate strong returns.” Kellanova It has a “strong brand portfolio.” Sanders said Many products are mature and recent growth has been “unimpressive because consumers have cut back.”
“Mars will have to put in a significant effort to acquire it. Kellanova “The question Mars will have to ask very carefully is whether it will bite off more than it can chew,” he said.
A big reason Kellogg separated its snack business from its slow-growing cereal business was to emphasize the growth potential of the snack business, which was no doubt what attracted Mars. Like other food companies, Kellanova has faced volume declines as consumers buy less of what and how much because of inflation.
Earlier this month, the Chicago-based company returned to growth and raised its annual organic sales and profit forecasts after noting that consumers are buying more of its products despite higher prices. Kellanova announced new product innovations across several of its household brands this year, from Puffed Pringles Mingles to Eggo Coffee, as part of its efforts to drive sales.
Kellanova CEO Steve Cahillane said in a statement that Mars will be able to “nurture and grow” the Cheez-It maker’s brand by fostering innovation in categories like healthy snacks.
“With our proven track record of successfully and sustainably growing acquired businesses, we are confident that Mars will be a natural home for the Kellanova brands and employees,” Cahillane said.
In an interview with CNBC on Wednesday, Cahillane said Kellanova does not anticipate any antitrust concerns about the deal. He noted that the only overlap between the two businesses is currently in the snack bar business.
