Out of the three well-placed initial offers for Kellogg’s cookies and fruit snacks, only two remain. B&G has dropped out of the race. It is likely that the Green Giant owner bowed out due to it’s market cap valuation of $1.6 billion being insufficient to shoulder the burden of a $1.5 billion purchase without going into debt.
The price tag for this deal also has Hostess Brands, whose market cap is $1.2 billion, getting creative with purchasing possibilities. Both Hostess and Ferrero are eyeing the territory Kellogg’s is ceding as they look to push deeper into the sweets and treats market. A hostess holds decades of experience marketing sweets with its Twinkies and Ho-Hos brands, while Ferrero — the longtime owner of Nutella — became the third-largest confectionery company in the U.S.
The fact that both companies are looking to take a larger stake in indulgent CPG products is a clear indication of their confidence in the growth of the sector. Although fresh, healthy and better-for-you products have been dominating shelves in recent years.
As one analyst told media, while Kellogg’s is looking to jettison cookies and snacks, Ferrero could benefit from the positioning it offers.
Jonathan Treiber, CEO of offer management software platform Revtrax conveyed through email communication with media, “Given the global nature of Ferrero and its products, the Keebler acquisition would likely expand its USA footprint for its existing products, while at the same time potentially taking Keebler’s brands into global markets it predominantly occupies.”
For Hostess, it would mean an opportunity to branch out of cakes and into other sweet treat categories that resonate with consumers. These Kellogg brands are iconic, so the public familiarity may mean lower marking expenses, even if some of the products are completely reimagined.
Although there is potential left for the cookie and snack brands, Kellogg’s new focus on the core breakfast, snacks and frozen foods that make up 80 percent of Kellogg’s North American revenue will allow the company to make the required “big investments and major changes to get our business back on track,” Chris Hood, the president of its North American division, told attendees at the Consumer Analysts Group of New York conference in February.