Big Food drops legacy brands to make way for new products
Healthier consumer eating habits and increasing millennial and Gen Z influence are pushing big food makers to switch up their portfolios and consider getting rid of slower-growing and less-popular brands, according to Bloomberg.
Smucker, General Mills, Conagra and Mondelez have been examining their offerings with an eye toward focusing on those that can provide a better-for-you image to consumers and also help the bottom line.
Smucker just sold its baking unit, including the Pillsbury brand, to private equity-owned Hometown Food Co., and the company has been ramping up its pet food focus with its $1.7-billion acquisition earlier this year of Ainsworth Pet Nutrition. Bloomberg also reported General Mills plans to shed 5% of its portfolio to invest more in cereals and lower-sugar yogurt.
As consumers increasingly turn to fresh fruits and meats without preservatives, looking for better-for-you products, Big Food is having to switch gears. Younger consumers are also becoming more influential as they weigh in with their purchasing decisions. According to the Organic Trade Association, 52% of organic consumers are millennials, which is a growing trend savvy food companies cannot afford to ignore.
In response, companies including Smucker, General Mills and Conagra are reshaping their portfolios by spinning off underperforming units and refocusing on other segments where they can succeed. Smucker plans to put more marketing heft behind innovations in coffee, peanut butter and snack brands, while General Mills will be shrinking its portfolio to put resources into core areas such as cereal and yogurt.
Hershey has been on an acquisitions push of late, buying up Pirate Brands from B&G Foods for $420 million and Amplify Snack Brands last year for $1.6 billion. The chocolate maker also took on Ripple Brand and its barkThins snacks in 2016 and the Krave Pure Foods snack maker the year before that. After the latest purchase is integrated, Hershey may decide to focus in on its reshaped portfolio even as it keeps an eye on other potential M&A options.
Better-for-you snacks may continue to be acquisition targets for companies since manufacturers are looking for convenient but healthy products that millennial and Gen Z consumers find handy, tasty and nutritious. Those shoppers are also less loyal to certain brands and will give something new a try if it looks like it could fit into their busy lifestyles.
According to Bloomberg, newer CEOs at Mondelez and Hershey are aiming product development and outreach at younger consumers who are more interested in flavor and intriguing items than in how long a brand has been around. Partnerships with startups or potential acquisitions along these lines are likely to be part of the scenario as well — since the healthier foods trend appears to a lasting one and not just a flash in the pan.