Campbell Soup announced Monday it would purchase Snyder's-Lance for $4.87 billion, or $50 per share. The deal, the largest in the soup company's 148-year history, is expected to close during the second quarter of 2018.
Campbell said the combination of brands will create a "snacking platform with approximately $4.7 billion net sales on a pro forma basis." The company added that it expects $170 million in cost synergies by the end of fiscal 2022.
"The combination of Snyder’s-Lance brands with Pepperidge Farm, Arnott’s and Kelsen will create a diversified snacking leader, drive sales growth and create value for shareholders," Denise Morrison, Campbell’s president and CEO, said in a statement. "This acquisition will dramatically transform Campbell, shifting our center of gravity and further diversifying our portfolio into the faster-growing snacking category."
In her six-plus years at the helm at Campbell Soup, Morrison has overseen several major acquisitions, including Bolthouse Farms, Plum Organics, Garden Fresh Gourmet and the $700-million Pacific Foods purchase finalized last week.
Luca Mignini, president of Campbell Soup's global biscuits and snacks division, told Food Dive the purchase of a large pure-play snacking company such as Snyder's-Lance is "potentially transformational." While the food giant has a large presence in the center of the store where sales are lagging throughout the industry, Snyder's-Lance allows Campbell Soup to better tap into millennials, snackers and on-the-go consumers who increasingly are dominating food consumption patterns.
"It's a great combination where we can be more aligned with the seismic shift that people have been talking about," Mignini said.
Campbell Soup is focusing its business on two areas: innovation and generating value in core brands like Prego, Swanson, V8 and its classic soups, while increasing its attention on "faster growing spaces which should help the company generate the type of growth that we all agree that we've been lacking," he said.
The Snyder's-Lance purchase will add to Campbell's portfolio such well-known snack brands as Cape Cod potato chips, Archway cookies, Snyder’s pretzels and Pop Secret popcorn. It is also expected to accelerate Campbell's access to faster-growing distribution channels, including the convenience and natural spaces, the company said.
Campbell already has a roster of popular snack brands, including Pepperidge Farm and Goldfish crackers. Prior deals, like its 2012 purchase of Bolthouse Farms, expanded the company into packaged fresh products for the first time —giving it access to a new area of the store and customers it didn't have as much exposure to.
"We do know the snacking area," Mignini said. "That's the difference compared to maybe other acquisitions where somehow, maybe there were areas where maybe we didn't know that much."
As people snack more, the Snyder's-Lance purchase will enable Campbell to play an intricate role in capturing that growth. A study by Datassential reveals that consumers, on average, eat about four to five snack foods a day.
While snacks currently generate about 31% of Campbell's sales, adding the Snyder's-Lance brands is expected to bring that proportion up to about 46%, and its soup brands would make up about 27% of annual net sales, the New Jersey company said.
Campbell and other packaged food manufacturers have faced an exodus of consumers fleeing processed foods in favor of more natural, organic and better-for-you items with a list of recognizable ingredients. So far, acquisitions and repositioning their own brands to have a cleaner label profile have not been enough to help stabilize these companies, boost sales and position them for future growth.
It's clear that Campbell is relying on its M&A strategy to bolster its business, and this acquisition of Snyder's-Lance is a bold move that will likely do just that. According to recent rumors, Snyder's-Lance was approached not only by Campbell but by another unnamed company since it had been a coveted acquisition target for some time. Conagra Brands, fresh off it's $250 million purchase of Angie’s Boomchickapop popcorn, has been looking at more acquisitions and was mentioned as a possible buyer.
Separately, Hershey announced plans Monday to acquire Amplify Snack Brands, parent company of SkinnyPop, for $1.6 billion, according to the chocolate maker. Amplify's portfolio also includes Tyrrells potato chips, Oatmega protein bars and cookies and Paqui tortilla chips.
As large CPG companies look to tap into trends popular with consumers, expect more deals in the snacking and better-for-you space to come.