Well, I guess we might have been overdue a megadeal in the snackfoods space and now we have one!
When Kellogg’s bought Pringles in 2012 the rationale was plain to see. Kellogg’s core market in breakfast cereals was facing further decline as consumers’ morning eating habits changed and became more mobile. Kellogg’s had already established a presence in the savoury snacking market with the acquisition of Keebler in 2001 which had brought brands like Cheez-It into their stable.
Pringles brought a step-change in scale in savoury snacks and a truly global presence that the Keebler brands had lacked. The Pringles acquisition brought the Kellogg snacking business to a scale comparable to their breakfast cereal business, so it was perhaps equally unsurprising that almost a year ago Kellogg’s completed the spin-off of that snacking business with the creation of Kellanova.
Since then, Kellanova has performed well with a recently announced upgrade to revenue forecasts for the year and the core Pringles brand having sales of over $3billion and growing by double-digits. At the same time, they have initiated the international expansion of brands like Cheez-It with its launch into the UK market to take on the likes of pladis-owned Jacob’s Mini Cheddars.
This uptick in activity and performance since the separation from its breakfast cereal parent may have been sufficient trigger for Mars to have paid a pretty full price to land this very significant acquisition in a space that is largely new to the confectionery, petfood and ambient food staples giant.
But as others have said, snacking products like Pringles, Cheez-It and Pop Tarts face their own challenges in terms of pressures from regulatory bodies, political lobby groups and consumers more widely given the HFSS status of much of the product portfolio. So why have Mars done it and is it a smart move?
In my book the answer is definitively “yes” and it’s because they see huge untapped global potential; not only for Pringles and at least some of the other Kellanova stable of brands, but also for the core Mars Wrigley confectionery business.
As recently reported in Confectionery News magazine, Fadi Abi-Nadir (VP, Global Emerging Markets at Mars Wrigley) is quoted as saying “Global Emerging Markets [such as India, Vietnam, Nigeria and Mexico] are where the future of snacking will be forged” and that “more than 75% of the future snacking category growth will come from these areas”. Mars (and the team at Kellanova) have undisputed knowledge of what it takes to compete with the likes of PepsiCo in snacking.
To a greater extent than with many other food staples, arm’s length availability and high share-of-mind/front-of-mind awareness are critical in these impulse categories, and the combined scale of Kellanova and Mars will give them competitive advantage in delivering those success factors.
It will also give them a product range well-placed to reach into some of those emerging markets…chocolate confectionery doesn’t travel well in markets with hot climates, but sugar confectionery and savoury snacks do. Bags of crisps don’t ship great distances cost-effectively, but densely packed, high-value tubes of Pringles do.
What Mars have done in acquiring Kellanova is add muscle to their global reach and add breadth and balance to their snacking product portfolio to compete effectively across a wide range of emerging markets and snackfood consumption occasions. We’ll watch with interest!