February 12, 2021
The sale, which is expected to close this year, will give Hormel ownership of most products included in the Planters brand—among them, mixed nuts, trail mix, Corn Nuts, Cheez Balls, and Cheez Curls. Planters brought in about $1 billion in sales in 2020.
The deal could very well be a win-win for the companies: For Kraft, ditching Planters will offer a chance to focus on its most successful brands (for example, Lunchables), the company said in a news release Thursday. The deal also will help Hormel to expand its snack offerings at a time when people are eating at home more.
Kraft Heinz CEO Miguel Patricio has been leading an effort to turn the company’s prospects around, since he came to the company last July from Anheuser-Busch InBev. Kraft has been selling off lower-margin businesses. Last year, the company announced a sale of its natural cheese business, including Polly-O and Breakstone’s, to the French company Lactalis for $3.2 billion.
Planters in particular is vulnerable to competition from private label products, said Patricio during an analyst call.
Before the pandemic, Kraft was struggling. Many on Wall Street said it failed to adapt to the changing tastes of consumers, who are shying away from processed foods.
According to CNN, analysts have also questioned the strategic decisions of private equity firm 3G Capital, which partnered with Berkshire Hathaway to first buy Heinz and then merge it with Kraft in a 2015 deal. After Berkshire Hathaway, 3G is the second-largest shareholder of the company. Following the merger, the combined company worked to cut costs—at the expense of much-needed innovation, many Wall Street analysts believe.
However, the pandemic, which has driven people to stock up on pantry staples and nostalgic foods, has helped boost Kraft’s sales. In the fourth quarter of 2020, net sales grew 6% to $6.9 billion, beating Wall Street’s expectations.
Research contact: @CNN