Kellogg’s announced it has reached an agreement to sell its Keebler and Famous Amos brands, along with other related cookies and fruit snack brands, to Ferrero in an all-cash $1.3 billion deal.
The divestiture, which includes selected cookies, fruit and fruit-flavored snacks, pie crust, and ice cream cone businesses, represents a portion of Kellogg’s North American portfolio which earned a combined $900 million in 2018, and includes production facilities in Augusta, Georgia, Florence, Kentucky, Louisville, Kentucky, Allyn, Washington, and Chicago, Illinois, and a leased facility located in Baltimore, Maryland.
The balance of its North American portfolio including crackers, salty snacks, wholesome snacks, and toaster pastry brands will be retained.
“Divesting these great brands wasn’t an easy decision,” said Steve Cahillane, chairman and CEO, Kellogg’s. “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,” adding, “…we are pleased that they are transitioning to an outstanding company with a portfolio in which they will receive the focus and resources to grow.”
As major CPG companies find it increasingly difficult to realize growth in today’s consumer market, Kellogg’s, among others,(General Mills has floated that its goal is to divest about five percent of its portfolio, and Campbell’s is selling its Garden Fresh brand) are aiming to streamline their businesses. However, Ferrero, the Italian maker of the famous Nutella spread, has been working to expand its global presence, completing four acquisitions in the U.S. since 2017, including spending $2.8 billion to acquire Nestle’s U.S. candy business.
This expansion, however, also requires a more guaranteed supply of raw supplies, and in November of last year, as part of a $70 million investment, Agri Australis, the Australian arm of the Ferraro Group, planted 1 million hazelnut trees on farmland near Narrandera, New South Wales, Australia.
The 2,600-hectare farm includes 1,860 hectares of cultivated land, and is operating as a demonstration farm for the company, which is trialing two varieties of hazelnuts to determine the one best suited to the climate in the Riverina region. Once harvested, the nuts will be assessed and used in the production of either Nutella and Ferrero Rocher, ice cream, or they will be destined for the fresh market.
Aside from Ferrero’s hazelnut farming initiatives in Italy, China, Germany, Poland, India, and Brazil, Ferrero has been stalwart in its pursuit of alternative channels of supplies, including deals in Serbia, India, Chile, South Africa, the state of New Jersey in the U.S., and Canada, according to Ferrero agronomist Barb Yates.
The addition of the assets from the deal with Kellogg’s will add brands to the Ferrero portfolio that saw approximately $75 million in profits in 2018, and gives the company entrance into the largest cookie market in the world.
“We see the acquisition of the branded cookies portfolio as a natural extension of our existing portfolio,” a Ferrero spokesperson told Forbes. “The overlap between the needs and wants of the confection consumer and the cookie consumer are extremely high, representing a number of opportunities to drive growth.”
-Lynda Kiernan
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