Kellogg becomes #2 global snacks firm with Pringles buy; analysts react

By Oliver Nieburg

- Last updated on GMT

Related tags Pringles Cheez-it Kellogg company

Kellogg becomes #2 global snacks firm with Pringles buy; analysts react
Kellogg’s $2.7bn deal to acquire Procter & Gamble’s Pringles will significantly boost its global snacks presence and open existing products up to new markets, according to analysts.

The move sees Kellog replace Procter & Gamble’s as the world’s number two snack firm, according to Euromonitor figures, though it is some way off the market leader Frito-Lay, owned by PepsiCo.

The deal came as a surprise to Marcia Mogelonsky at Mintel, who told on Tuesday that Kraft was the prime candidate for Pringles.

“They were not on my list at all,”​ she said.

Euromonitor analyst Jared Koerten had also said Kraft were likeliest to acquire Pringles.

“While Euromonitor International suspected that Kraft had the most to gain following the split of its new global snacks company, it is not a total surprise that another large player would move in to acquire the Pringles brand,”​he said today.

Global growth

Kellogg said in its conference call yesterday that Pringles was present in 140 countries and would significantly strengthen Kellogg’s global snacks business.

Mogelonsky said: “The buy gives them a lot of room for global growth.”

“It opens up Asian markets for Kellogg, where Pringles are popular, and also increases distribution networks for Kellogg in markets beyond Asia (South America, for example),” ​she said.

Kellogg CEO John Bryant said that the inclusion of Pringles would increase Kellogg’s snacks business in North America by $500bn and would almost triple the size of its international snacks business.

“It is one thing to have the new shelf space, but Kellogg will probably be wanting to try to use the space to expand its cereal and cereal bar markets,”​ said Mogelonsky.

Depending on its strategy, she said the increased exposure could help Kellogg convince Asians to get more interested in cold cereal.

“Or is this the start of Kellogg expanding its snack food into less healthy salty snacks.”

Koerten said Kellogg’s current distribution of major snack brands – including Keebler and Cheez-It – was largely domestic/US based.

“Pringles, on the other hand, has a geographically broad distribution network that will substantially diversify Kellogg’s portfolio.”

“One of the challenges facing Kellogg is that it now enters an entirely different competitive environment with its move into the salty snacks market. It now faces a sector dominated by Frito-Lay“

Product portfolio mismatch?

The Pringles buy leverages Kellogg’s position in the salty snack category where its presence was negligible.

Mogelonsky : “This is the company of All Bran and Special K crackers, FiberPlus and NutriGrain. Now it is also the owner of a typically not especially healthy salty snack.”

“It will be interesting to see how the company will balance its ‘good for you’ portfolio of healthy brands with its expanded portfolio of snack foods that don't fit that image,” ​she continued.

“Will Kellogg now change its tagline to ‘The Best To You Each Morning... but at snack time, enjoy!’”

Koerten however viewed the addition more positively: “Prior to the deal, Kellogg was not a competitor in the salty snack aisle.”

“By acquiring Pringles, the company has expanded its footprint and can now meet consumer demands for snacks in many different ways,” ​he said.

Diamond in the rough

Kellogg sealed the acquisition from under the noses of Diamond Foods, whose bid to acquire Pringles collapsed after it removed its CEO and chief financial officer over improper accounting.

I am convinced that there must have been a furious behind the scenes bidding war to jack up the price and to explain why P&G let Diamond off the hook without any penalties,” ​said Mogelonsky.

Koerten added that it was not unreasonable to think that other companies would look to acquire parts of Diamond following its lost bid for Pringles.

Related topics Business Kellanova & WK Kellogg Co

Related news

Show more

Follow us


View more