Kellogg’s Keebler and other cookies officially head to Ferrero in $1.3bn deal
Together, these brands reached nearly $900m in sales and $75m in profits.
The transaction will include six of Kellogg's US facilities, including two in Kentucky, one each in Georgia, Washington and Chicago, Illinois and a leased manufacturing facility in Baltimore, Maryland.
"We have great respect for Kellogg, its legacy and values, and are proud that Kellogg has chosen Ferrero as a good home for these businesses,” said Giovanni Ferrero, executive chairman of Ferrero Group.
CEO Lap Civiletti added these established brands carry weight in their categories, which will help the company expand its growing footprint in North America.
Ferrero last year took on Nestlé’s US confectionery business in a deal valued at $2.8bn – in turn becoming the third largest confectionery company in the US. In December, the once candy-focused company was rumored to be exploring Campbell's international business, including Australian biscuit brand Arnott's.
Kellogg's, meanwhile, has been moving to ‘reduce complexity’ within the portfolio, said Steve Cahillane, Kellogg's chairman and CEO.
"Divesting these great brands wasn't an easy decision, but 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," he said.
Since the game-changing Kashi acquisition in 2000, Kellogg's scooped up Pringles in 2012 for $2.7bn and popular energy bar company RXBar in 2017 for $600m.
Next month, Ferrero is expected to launch a new Nutella-filled biscuit in France, further expanding the reach of its chocolate and hazelnut spread, which was launched by Giovanni Ferrero's father, Michele Ferrero, in 1964
The Battle Creek, Michigan-based company bought Keebler in 2001 for $4.4bn. Shedding that part of the portfolio will allow Kellogg to focus on the rest of its North American snacking business: crackers, salty and wholesome snacks and toaster pastries.
Cahillane said the Keebler team will join “a first class organization in Ferrero, where they undoubtedly will thrive.”
Pending regulatory approval, Kellogg expects the all-cash transaction to close by the end of July.
Consolidation will continue
Kellogg's desire to divest a subcategory in its portfolio 'reflects an emerging trend' that shows CPGs focusing on core brands, said Richard Parker, principle consumer analyst at GlobalData.
The cereal giant has apparently decided that brands like Pringles and Cheez-Its deserve more investment in today's volatile consumer landscape, where health and wellness rule.
Cookies and related sweets "are possibly better served within a corporate environment where they are a core business rather than a relative side-line," he said.
Noting Campbell's exploration of divesting some of its snacking business, he emphasized that this truth is not unique to Kellogg's. "The direction of travel suggests that we will see further divestiture/acquisition activity in snacks, as leading players create more focused portfolios.’’