How Mars will change with Kellanova
Mars, with the acquisition of Kellanova for almost 30 billion dollars, absorbs a group capable of recording net sales of over 13 billion dollars in 2023, with a presence in 180 markets and approximately 23 thousand employees. The in-depth analysis by Mario Sassi, author of the Blog-notes on work
There is certainly a business complementarity factor in the decision. However, it is not just this. But let's proceed in order. Mars, the maker of M&M's, is buying Kellanova, the maker of Cheez-Its and Pop-Tarts, for nearly $30 billion, dramatically expanding the number of brands it owns. The acquisition is part of the expansion plan of Mars, which had announced its intention to double its portfolio over the next decade, which already includes 15 brands, to which are now added brands such as Pringles, Kellogg's, Cheez-It, Pop- Tarts, Rice Krispies Treats and NutriGrain.
With this operation, Mars absorbs a group capable of recording net sales of over 13 billion dollars in 2023, with a presence in 180 markets and approximately 23 thousand employees. The acquisition expands Mars' reach into the savory snacks category. An interesting business. The company owns brands such as Combos and Uncle Ben's, but is primarily known for its chocolates, candies and pet food. Mars has, among its products, M & M's, Lifesavers, Juicy Fruit chewing gum and Skittles, as well as Pedigree and Royal Canin pet foods. Sales of some of these products, such as chewing gum , have declined sharply in recent years, while snacks have changed and are growing.
Mars has grown steadily through acquisitions. It entered the pet food business in 1935 with the purchase of a UK dog food brand and purchased the Dove ice cream brand in 1986. In 2008, it purchased the Wrigley chewing gum business for 23 billions of dollars. Mars is considered one of the largest candy and pet food companies in the world. In its pet care, snacking and food businesses, the company recorded net sales of over $50 billion in 2023 alone.
With assets of 117 billion dollars (data updated as of August 2, 2024), the Mars family is the second richest in America , behind only the Waltons (Walmart) with assets of 267 billion dollars. Mars' purchase of Kellanova is expected to close in the first half of next year. Once completed, Kellanova will become part of Mars Snacking. Corporate headquarters will remain in Chicago. Mars, headquartered in McLean, Virginia, is one of the largest privately held companies in the United States.
Kellanova was formed last year when Kellogg Co. , the maker of Frosted Flakes, Rice Krispies, Pringles and Eggos, split into three entities focused on cereals, snacks and plant-based foods. In 2019, Kellogg had sold its biscuits, fruit snacks, cake bases and ice cream cones business to the Ferrero Group. Cereal sales in the United States have been declining for years as more convenient products, such as energy bars, replace them. They saw a brief rebound during the pandemic lockdowns, when breakfasts at home returned. But sales fell again in 2021, never to rise again. Kellogg also said it was willing to sell its presence in plain-based foods, which is facing fierce competition. Kellogg's three international headquarters in Europe, Latin America and AMEA will remain in their current locations.
The last major food spin-off was in 2012, when Kraft's global snacks business was renamed Mondelez International. Mondelez then made its grand entry into the snacks industry in 2022, with the acquisition of Clif Bar & Co., a major energy bar and sports supplement company. A 2.9 billion dollar deal.
However, it should be underlined that these operations are the consequence of a particularly complex period for the food industry due to the increase in costs, both of labor and raw materials. Russia's invasion of Ukraine has pushed wheat prices higher and data in the United States confirms that inflation has changed Americans' habits. The agreement, therefore, is not only important for Mars. It is fundamental for Kellanova in a difficult moment in which the increase in prices is creating problems for both consumption and many companies .
There is strong social pressure to reduce prices. In the second quarter of this year, Kellanova lowered its prices by 1% in North America. Despite this, most Kellanova snack brands outperform category competitors, particularly among Gen Z and Millennial consumers. It offers a stronger, more differentiated portfolio and distribution platform for priority international markets to meet the demands for flavor diversity and pricing in fast-growing geographies, including Africa and Latin America.
It brings together, in terms of human resources, world-class talent with leading experience in building brands. Combine complementary capabilities to unlock growth and consumer-centric innovation. The addition of Kellanova's research and development capabilities will enable the new company to share best practices in brand building and provide advanced digital capabilities. Improves positive social impact when it comes to sustainability. Kellanova has a long history of social and environmental leadership that I've written about before , including its Better Days Promise initiative, which integrates the Mars Sustainable in a Generation Plan.
Kellanova will also become part of the Mars Net Zero commitment and align with the Mars Responsible Marketing code. Mars plans to finance the acquisition with a mix of cash reserves and new debt, with commitments already secured. After years of inflation, many consumers, not only in the US, are reducing their food spending and are also finding it difficult to afford branded snacks. And this situation of uncertainty about the prospects makes acquisitions more interesting for those who can afford them.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/mars-kellanova/ on Mon, 19 Aug 2024 05:00:21 +0000.