Hormel to buy Planters From Kraft Heinz for $3.35 billion
Hormel Foods Corp. agreed to buy the Planters snack brand from Kraft Heinz Co. for $3.35 billion in cash, expanding the Skippy peanut butter maker’s portfolio of pantry staples as the pandemic drives demand for packaged food.
The transaction provides a tax benefit of about $560 million, Hormel said in a statement Thursday.
The acquisition bolsters Hormel’s catalog of brands, which already includes household names like Skippy, Spam and its eponymous deli meats, and sharply increases its presence in convenience stores. While packaged foods have benefited during the pandemic as Americans have stocked their pantries, foodservice revenue has taken a hit with restaurants and shopping centers closed or operating with limited capacity.
The purchase will be Hormel’s largest to date, according to data compiled by Bloomberg News. Analysts have anticipated more deals by Hormel following several acquisitions in recent years, including buying Justin’s nut-butter brand in 2016.
Planters is America’s top-selling brand in the nuts, seeds and trail mixes category, according to data from Euromonitor. Its grip is slipping, though, with its market share dropping to 16.2% last year from 22.9% in 2015. Planters had net sales of about $1 billion in 2020, Hormel said, noting that it plans to grow the brand.
Hormel executives, speaking on a conference call, said they believe Planters needs additional investment in advertising and innovation, and that such investments are factored into its projections. “Planters is way more than just peanuts in a jar," they said.
Kraft Heinz CEO Miguel Patricio, speaking on his company's quarterly conference call, said the decision to sell was driven in part by competitive concerns. “Planters is one of the brands most affected by private label in our portfolio.”
Kraft Heinz ran Super Bowl ads for Planters in 2019 and 2020 from VaynerMedia. The 2020 campaign saw the brand's Mr. Peanut character killed off and resurrected. This year, Planters skipped the game, announcing the brand would instead put $5 million toward supporting “unsung heroes” during 2021. Planters was also in the big game in 2008 with a spot from DraftFCB.
For Kraft Heinz, which was formed through a 2015 merger orchestrated by Warren Buffett and 3G Capital, the sale will help simplify its operations as the company pursues a cost-cutting plan. The maker of Heinz ketchup and Capri-Sun agreed in September to sell parts of its cheese business to a division of Groupe Lactalis for $3.2 billion.
News of the sale came the same morning Kraft Heinz reported fourth-quarter organic revenue that beat the average analyst estimate. In the first fiscal quarter, the company expects flat-to-positive organic net sales growth, even when compared to a strong first quarter last year at the start of the pandemic.
“We have momentum at our back,” Patricio said.
Shares of Hormel fell 4% in midday trading, while shares of Kraft Heinz rose more than 5%.
—Bloomberg News, with additional reporting by Ad Age