April 16, 2019
The market for snacking globally faces strong headwinds, most of which are emanating from the influence of the Health & Wellness mega-trend on consumers’ attitudes and behaviours .
Consumer movement to healthier snacking options or more moderate consumption of classic snacks and confections is putting pressure on traditional market leaders and forcing tough decisions about strategic direction and investment.
A case in point is Kellogg’s announcement that it is selling its cookie, fruit-snack, and related portfolio of businesses to confectioners The Ferrero Group for $1.3billion. The deal includes iconic US cookie brands such as Keebler, Famous Amos, and Mother’s, and six US manufacturing facilities.
Italian Ferrero has emphasized the strategic fit that its new acquisitions offer as it seeks to expand its footprint in the US market, while Kellogg’s has stressed a need to continue its pursuit of reduced complexity and more targeted investment within its group.
Indeed, Kellogg’s divestiture of such well-known brands in the cookie market and related businesses to Ferrero reflect an emergent trend for consolidation. Kellogg’s action shows it is committed to the need to focus on core brands, and to direct investment where it believes it has the best chance of reviving fortunes (for example, brands such as Pringles and Cheez-Its that have seen health-focused consumers shying away).
Cookies constitute a challenging category in the grocery market, given the continuing pressure, the trend for health and wellness exert on it, meaning such brands are possibly better served within a corporate environment where they are a core business rather than a relative side-line.
Campbell’s has also been exploring opportunities to divest some of its snacking businesses (with Ferrero having shown interest there too at one point), highlighting that this is not only an issue for Kellogg’s. The direction of travel suggests that we will see further divestiture/acquisition activity in snacks, as leading players create more focused portfolios to make better use of their core strengths and investment resources.