Dive Brief:
- B&G Foods is buying McCann's Irish Oatmeal from TreeHouse Foods for $32 million in cash, according to a company statement.
- Sales from McCann's were about $13 million in 2017, according to a statement from TreeHouse Foods. The private label manufacturer acquired the premium oatmeal brand with its acquisition of Sturm Foods in 2010. In TreeHouse's statement, President and CEO Steve Oakland said that the sale helps TreeHouse simplify and streamline its business and concentrate on private label manufacturing. Proceeds will pay down debt.
- In his company's statement, B&G President and CEO Robert Cantwell was excited about the acquisition. “McCann’s is an excellent complement to our existing portfolio of brands, including our Cream of Wheat hot cereal brand," Cantwell said in the statement. "This acquisition is another example, along with our acquisitions of Green Giant, Spice Islands and other spices and seasoning brands, Victoria and Back to Nature, of our efforts in recent years to acquire better-for-you brands that taste great and resonate with today’s consumer.”
Dive Insight:
With B&G Foods perpetually on the hunt for new acquisitions and TreeHouse Foods trying desperately to find ways to grow its top line, this deal not only makes perfect sense, but offers an ideal fit for both parties.
B&G is well known for its large stable of varying brands. With this acquisition, it will be up to 52 — ranging from Ortega to Green Giant to Molly McButter. Between 1997 and 2017, the manufacturer has completed 20 acquisitions. Net sales grew from $129 million to $1.4 billion in net sales — a 985% increase — in just 10 years.
Chief Financial Officer Bruce Wacha told Food Dive earlier this year that what makes B&G stand out is its reputation for buying brands — though he said that the company needs to remain disciplined about what makes sense in its portfolio.
On a February earnings call, Cantwell said that the company was on the lookout for more smart acquisitions. "I think acquisitions are extremely important," he said on the call. "It's part of our model, and acquisitions that deliver products that today's consumer wants. And I think that's what we've done in our last number of acquisitions."
Considering that Cream of Wheat buoyed B&G's companywide 4.7% sales growth in the last quarter, hot cereal is a hot investment for the manufacturer. On its own, Cream of Wheat sales were up 11.2%.
B&G can expand on that success with McCann's Irish Oatmeal. The brand has a rich and storied history, starting with a family-owned Irish mill built in 1800. And while Irish oatmeal sounds more exotic than steel-cut oats — which is how Americans tend to refer to the variety — that type of oatmeal is healthier and has more protein than other more processed options, like rolled oats. The breakfast cereal's health portfolio is gaining in popularity, with Zion Market Research projecting that oatmeal's global market value will reach $2.5 billion by 2022. McCann's Irish Oatmeal also already has products under its banner that fit into two trendy categories — non-GMO and gluten-free — that can only help its popularity grow.
Despite the possibilities of McCann's, the brand was not a fit under TreeHouse Foods — especially through the manufacturer's struggles. TreeHouse's sales have been weak, with the company reporting a net loss of $34.1 million in its most recent earnings report — compared to net income of $28.2 million a year before. In February, the company announced plans to close a California pretzel and cereal snack mix plant by the end of the first quarter next year, impacting 249 employees and costing the company an estimated $21 million. The company is also shuttering a ready-to-eat cereal plant with 84 employees in Battle Creek, Michigan. And through these changes, TreeHouse has seen lots of c-suite turnover — former chairman Robert Aiken left just three months after joining the company, and Oakland became CEO in March.
Sam Reed, TreeHouse's former CEO and company chairman, told investors on a conference call in May that in its quest for profitability, the company had abolished a quarter of its SKUs and was embarking on a plan to "return our TreeHouse to private label fundamentals in order to deliver progress, productivity, and prosperity in transitioning from the past to the future."
Shaking off a brand like McCann's should help the manufacturer concentrate on its core mission. Meanwhile, with this acquisition, B&G can exercise its mission of expansion through working with well-known brands.