UPDATE: May 7: Campbell Soup is looking to sell its Kettle brand in the U.K, but retain the brand in the U.S., a source familiar with the company's plans told Food Dive.
- Campbell Soup is reportedly looking to sell its Kettle chips brand, according to U.K.-based news agency The Press Association. The company acquired the brand as part of its $5 billion dollar deal with Snyder’s-Lance, which closed last year.
- The soup giant reportedly hired Barclays to explore the sale of the brand. A source told The Press Association that Kettle could be worth between $65.5 million and $131 million.
- Kettle, which offers a variety of potato chips, launched in 1978. If the sale goes through, the transaction will mark Kettle's third owner in four years.
In its quest to become more than just a soup brand, Campbell purchased Snyder's-Lance in 2018, which reduced the amount of sales that come from soup from 35% to 27%. The growing snacks segment jumped from just below a third to nearly 50% of the company. But to finance that deal, the company more than tripled its debt load.
That transaction has forced the company to use M&A to streamline its business and now it's looking to cut Kettle. Last month, Campbell Soup announced it would sell its Bolthouse Farms business to an affiliate of private equity firm Butterfly Equity for $510 million. Just a few months earlier, Campbell Soup sold its Garden Fresh Gourmet brand to an affiliate of Fountain of Health USA.
At the same time, as pressure from activist investor Daniel Loeb continues to hover, Campbell is looking to sell its international business, which includes Arnott's and Kelsen biscuit brands. Although Mondelez reportedly submitted a bid to buy the international business in March, insiders say the companies are in a stalemate over the price.
Still, this approach to realigning with its core snacks and soup business is showing signs of success. Campbell Soup's sales increased 24% to $2.71 billion in its second fiscal quarter, topping analyst expectations as it benefited from recent acquisitions.
The sale of the U.K. brand of Kettle could be the next step. Although chips are clearly part of the snack category, they are no longer a principal participant as consumers begin to gravitate more toward healthy snacks. Kettle, in particular, has been struggling due to a declining market share. The Kettle brand in the U.K. experienced a $5.63 million operating loss in the seven-month period ending on July 2018 compared to 2017, British Telecommunications reported. Even during the profitable period of 2017, Kettle was ranked ninth on the list of the U.S.'s top chips with $16.3 million in U.S. sales — a far cry from leading brand Lay's, which has $1.7 billion in sales, or 30% of the market.
Chips as a snack are not obsolete, however. A study by the IMARC Group shows the potato chip market is expected to grow year-over-year at a CAGR of 5% to $127 billion by 2022. With growth still on the horizon, it would not be surprising to see interest in the sale of Kettle.
B&G may be one of the interested parties which, after selling Pirate Brands to Hershey in 2018 for $420 million, likely has the funds to make an investment. The serial acquirer is renowned for rejuvenating languishing brands and already has a diverse portfolio, which would make it adept at handling a product like Kettle.
Hershey may also be interested in the brand though. The chocolate maker has been slowly changing directions as it looks to turn into an "innovative snacking powerhouse" through purchasing brands like Krave in 2015, snacking chocolate barkTHINS in 2016 and Amplify in 2018. Yet other companies like Kellogg — which reinvented its Pringles line last year and divested its underperforming cookie and fruit snacks business — jostling their portfolios to get into the lucrative snack space may be interested as well.
For right now, the sale of the potato chips brand in the U.K. remains in the investigative stages. Campbell may determine that it is not ready to sell or may try to reinvigorate it. However, should a sale come to fruition, it is a proposition that several CPG companies will likely have interest in.