Wealth Advisor Rockville, MD
The Kellogg Company is saying goodbye to cookies to focus on salty snacks and cereal, selling off Kellogg’s Keebler cookies, Famous Amos, Mother’s, Murray’s, Girl Scout cookies and fruit snacks brands to Ferrero Group for $1.3 billion. The Italian confectionery company makes Nutella, Tic Tacs and Ferrero Rocher chocolates and other well-known treats.
In 2018, the businesses that Ferrero bought made about $900 million in sales but only made a $75 million in operating profit, reports CNN Business.
Since November 2018, Kellogg has been looking to sell off the low-priority brands that weren’t fitting with the company’s focus and as a result the company had difficulty with the resources required to compete in the abundant cookie market.
“Divesting these great brands wasn’t an easy decision,” said Kellogg’s CEO Steve Cahillane in a statement. “This divestiture is yet another action we have taken to reshape and focus our portfolio, which will lead to reduced complexity, more targeted investment, and better growth.”
Ferrero’s billion dollar acquisition helps it expand its North American business, allowing the company to “significantly diversify our portfolio and capitalize on exciting new growth opportunities in the world’s largest cookies market,” said Lapo Civiletti, CEO of the Ferrero Group.
Christopher Hood, President of Kellogg North America, compared Kellogg’s cookie business to its acquisition of Pringles from Procter & Gamble in 2012. When it was at P&G, Pringles “was not a high-growth business within P&G, not a business that the company was interested in investing in, because they had alternative places where they could invest for high return. It’s a similar situation for us within Kellogg’s.”
But under its new umbrella company, Pringles was a boost to the Kellogg’s business. Citing Nielsen data, Kellogg’s said in February that Pringles retail sales grew 7%—giving credence to their catchphrase, “Once you pop, you can’t stop.” Similarly, Cheez-Its grew 5% in 2018.
Retail sales of Rice Krispies Treats snap, krackle and popped up 15% and Pop-Tarts came in hot, growing 2% in 2018. Cahillane has said Pringles, Cheez-Its, and Pop-Tarts are the company’s “power brands,” which it will now be focusing on.
Kellogg is also set to bring in new trends into their business. In 2017, the company announced the acquisition of RXBar, the protein bar brand that has expanded into nut butters and kids treats.
When it announced plans to sell off the cookie brands, Kellogg said it planned on reorganizing its North America team and would be investing in e-commerce.
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