Industry Trend Analysis - Campbell's and Hershey's Acquisition Focus On Convenience Food - 08 JAN 2018

BMI View : Major food manufacturer ' s acquisition drives, that have seen companies shifting away from their traditional product offerings to a more diversified portfolio that includes brands which offer products more aligned with consumer preferences for convenience foods and healthy products, will continue in 2018. Campbell's and Hershey's have engaged in vertical M&A activity to acquire Snyder's Lance and Amplify Snacks Brands respectively.

One of our key themes for 2018 highlights the continuation of vertical merger and acquisitions (M&A) activities, with food and drink majors buying up smaller, niche brands as consumer dietary preferences shift (see ' Key Themes for Food & drink In 2018', December 8, 2017). Core product offerings from major food manufacturers are resonating less with consumers, as demand from the major spending group 'millennials' (aged 20-39 years old) focuses more of convenience foods and products known for their health properties.

In the latest flurry of vertical M&A activity, Campbell's is set to buy Snyder's Lance, the company behind Kettle Chips crisps and Pop secret popcorn, for USD4.9bn. Meanwhile, Hershey's also announced its plans to buy Amplify Snacks Brands, the maker of Tyrrells crisps and Paqui tortilla chips, for USD1.6bn.

Both company's acquisition deals can be attributed to poor performance of their core brands. Campbell's canned soup has lost its popularity among Americans while Hershey's focus on sugary products and chocolates are being impacted by the perception of high sugar content products being unhealthy. Campbell's acquisition comes on the back of poor financial performance for the company with net sales falling by 2% y-o-y in Q118 (ending October 2017). Hershey's is also experiencing slowing growth, with net sales in Q317 (ending October 2017) growing by 1.5% y-o-y compared to 2.2% in Q316 (ending October 2017).

A Slump For Campbell
Campbell Net Sales, %y-o-y
Source: Cambell Company Filings, BMI

Although the brands under Snyder's Lance and Amplify Snacks brand are not typically associated as being health foods, the companies' products have no artificial flavouring, trans fats and come in diary-free and naturally-sweet flavours that are proving popular among millennials. Moreover, millennials are also interested in convenient and healthy snacking alternatives. BMI forecasts the millennial segment of the US population will grow by 2.4mn over 2017 and 2021, with this age bracket reaching 90.7mn people in 2021.

Growing Millennial Consumer Favouring Convenience and Health-Focused Snacks
US Young Adults, 20-39 years, '000
e/f= BMI estimate/ forecast. Source: BMI/UN

Hershey's and Campbell's latest acquisitions further highlight these major food manufacturers diversifying away from their traditional product offerings. Hershey's has acquired brands such as Krave meat jerky and Ripple Brand Collective's barkTHINS over the last two years. Meanwhile, Campbell Soup bought Pacific Foods, maker of organic broth and soup and plant-based beverages like almond milk, for USD700mn in June 2017. Furthermore, companies such as Nestle, General Mills, Mars and Danone have also added added new brands and so product lines to their portfolios in a bid to diversify.

Acquisitions And Deals Amongst Major Food Manufacturers
Food Manufacturer Development Development Type Food Sector Other Info
Source: Various News Sources
Nestle Acquired Sweet Earth Acquired for Undisclosed Sum Chilled and Frozen Vegan and Vegetarian Food Acquired in September 2017
Acquired Freshly USD77mn new funding for the brand Online Healthy Ready Meals Company Acquired in June 2017
General Mills Acquired Purely Elizabeth Invested $3 million in Purely Elizabeth to acquire a minority stake Non GM, Gluten Free Granola Brand Acquired in August 2017
Investment In D's Naturals Undisclosed investment Plant-based Protein Bar Planned Investment in February 2017
Investment In Beyond Meat Undisclosed investment for 5% stake Plant-based meat alternative Planned Investment in October 2016
Investment In Kite Hill Investment of USD6mn Vegan Cheesemaker Planned Investment in January 2017
Acquired Rhythm Superfoods Investment of USD18mn Kale Chip Company Planned Investment in May 2017
Unilever Acquired Pukka Herbs Acquired for Undisclosed Sum Herbal Teas Acquired in September 2017
Launched Pure Leaf Herbal and Speciality Teas Launched in February 2017 Herbal Teas Launched in February 2017
Acquired T2 Acquired for Undisclosed Sum Premium and Herbal Teas Acquired in September 2013
Danone Acquired Whitewave - Alpro, Silk, So Delicious, Vega Acquired for USD12.5bn Plant-Based Food and Drinks Company Acquired in April 2017
Hershey's Acquired BarkTHINS Acquired for Undisclosed Sum Snacking Chocolate Brand Acquired in April 2016
Acquired Amplify Snacks Brand Acquired for 1.6bn Healthy Snacks Company Acquired in December 2017
Campbell Acquired Pacific Foods Acquired for USD700mn Organic broth and soup and plant-based beverages Acquired in June 2017
Acquired Snyder's Lance Acquired for USD4.9bn Salty Snacks Maker Acquired in December 2017