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Industry news

Report: Ferrero, Hostess and B&G express interest in Kellogg's cookies

Time: 2019-01-25 15:29   Source: IFE China   Clicks:

Dive Brief:

  • CNBC reported that Hostess Brands, B&G Foods and Ferrero have placed preliminary bids of more than $1.5 billion on Kellogg's Keebler, Famous Amos and fruit snacks businesses. The cookie brands were announced for sale last year.

  • A spokesperson for Kellogg told CNBC last week that the company is "exploring the potential divestiture of our cookies, fruit snacks, ice-cream cones and pie shells businesses. A formal process is underway."

  • At the same time, other cookie brands have popped up for sale, including Kellogg’s competitor Campbell’s who is selling their Australia-based Arnott's. Ferrero is also bidding on Campbell's cookie business, CNBC reported.

Dive Insight:

Keebler's cookies have been a revenue drag on Kellogg since the Michigan company paid $3.86 billion to acquire the baker in 2000. Back in 2004, the company was grumbling about the cookies' performance, which had slipped by $600 million since Keebler was independently owned. Company officials said at the time that the reason was because consumers were uninterested in less-than-healthy snacks.

The same observation still holds true 15 years later, leading Kellogg to put the cookies up for sale, giving up on trying to change consumer tastes and instead just focusing on its core business of cereals and its existing Morning Foods, Snacks and Frozen Foods segments.

Even though clean label seems to be the name of the game, there is still a sizable market for those wanting to tap into consumers’ sweet teeth. With Hostess Brands, B&G Foods and Ferrero reportedly already interested in picking up the brands, there is a good chance that more companies will express interest.

These three initial offers are from companies that are well placed to acquire Kellogg’s cookies. Hostess already has decades of experience marketing sweets with its Twinkies and Ho-Hos brands, while Ferrero — the longtime owner of Nutella — pushed deeper into the sweets and treats market when it purchased Nestlé’s U.S. confectionery business for $2.8 billion last year. B&G Foods is always anxious to add another lagging product to its portfolio to create a profitable turnaround, like it did with Green Giant.

Still, with Keebler’s track record of decreasing sales, it will be quite a gamble for any company that picks it up.

But Kellogg isn't the only big name brand dropping its cookies. Campbell Soup is also shedding the cookie branch of its business Arnott's as it works to pay down the debt left in the wake of its $6.2 billion acquisition of Snyder's-Lance last year. It’s reported that the sale could fetch $2.5 billion to $3 billion from buyers including Mondelez, Kraft Heinz and Ferrero.

While this sale coincides with that of Kellogg’s brands, it's not in direct competition because Arnott's is exclusively sold in Australia. But the reported interest shows other CPG firms are definitely interested in cookies as a way to sweeten their portfolios. Arnott’s, however, would be a way for a company to expand its global footprint, while Kellogg’s brands are an ideal method to increase a foothold in the American snacking sector. Perhaps there is even a way for a potential buyer — like Ferrero — to take both and stake its dominance in worldwide cookie brands.