- Frozen foods company Schwan's has hired investment firm Piper Jaffray to help it assess its strategic options, which could include a potential sale of all or parts of the company, reports CNBC.
- Included in the 70-year old company’s frozen foods product portfolio are pizza brands Red Barron, Freschetta and Tony’s; Mrs. Smith’s and Edwards pies; and Asian snacks brand Pagoda.
- Company sales are estimated to be around $3 billion, according to Forbe’s latest America’s Largest Private Companies list, which could make a digestible deal as far as size goes. The company recorded roughly $260 million in earnings before interest, taxes, depreciation and amortization, reports CNBC.
According to Nielsen data cited in a recent Acosta report, frozen food sales have remained relatively flat, recording just 0.2% CAGR during the past five-year period. Unit sales have declined 6.7% with several large categories — including prepared foods, desserts, vegetables and pizza.
These kinds of statistics prove the vulnerable position Schwan’s, one of the country's largest private companies, is in. The company’s frozen foods product mix — which includes Red Barron and Tony’s pizzas, and Mrs. Smith’s frozen pies — is in the cross hairs of struggling frozen foods categories, which could explain why Schwan’s is looking to sell.
Still, promising results from companies such as Nestle (Lean Cuisine), ConAgra Brands (Healthy Choice, Banquet and Marie Callender’s), Pinnacle Foods (Birds Eye, Gardein), and B&G Foods (Green Giant) demonstrate the opportunity for a comeback within the frozen foods segment. These brands have been tapping innovations in ingredients, flavors and packaging with a focus on today's definition of health to bolster their brands and the frozen foods category performance. Green Giant, for example, will debut its own line of frozen, spiralized vegetable noodles in stores nationwide in January. The company's pasta alternatives will initially be available in zucchini, carrot and butternut squash varieties,
The Acosta study finds 26% of U.S. consumers now shop the frozen foods department more frequently than they did a year ago. All generations reported buying more frozen food, but the increase was driven in large part by millennials, 43% of whom said they bought more frozen foods than they did in the prior year. Nielsen data finds that sales of frozen meals grew 2% in the year ended Oct. 28, a vast improvement from the 2.3% decline three years earlier.
This spells good news for frozen food manufacturers, especially those that remain focused on providing the healthy and convenient product solutions that consumers seek. Consequently, some of the aforementioned big CPG companies could be considered prime candidates to buy Schwan’s and help turn around its iconic brands. Another logical buyer cited by CNBC is smaller-scale Thailand-based Charoen Pokphand Foods (CP Foods), which acquired U.S.-based frozen food company Bellisio Foods last year.
B&G Foods is known for its keen sense of adding struggling brands to its portfolio and then rejuvenating them through innovation and new product launches. Green Giant, which the company bought in 2015 from General Mills, is a perfect example. “We remain well-positioned for future acquisitions," Robert Cantwell, the company's president and CEO, told analysts recently. "This organization is ready and structured to be ready to continue to grow through acquisition.”
Pinnacle Foods also could be a potential suitor. In 2015, it acquired the natural and organic foods manufacturer Boulder Brands, which includes several good-for-you frozen brands in its portfolio. In May, Conagra approached Pinnacle to discuss a possible takeover, a deal which ultimately fell through. So it seems Conagra could actually be in a better position than Pinnacle for an acquisition. The company probably could find significant synergies across the Marie Callender’s, Mrs. Smith’s and Edwards brands.
Nestle probably is one that can be crossed off the buyer’s list. The company has been under considerable pressure from activist investor Daniel Loeb to streamline corporate operations and focus on growth ever since Loeb's Third Point hedge fund bought a $3.5 billion stake in the company in June. Third Point has outlined several changes Nestle could make, which includes selling non-core assets, such as its frozen foods businesses.
However the Schwan’s situation ultimately plays out, one thing’s likely — the food manufacturing landscape will continue its acquisitive ways as Big Food seeks the growth, innovation and business efficiencies to sustain their positioning in what’s become an increasingly competitive marketplace penetrated by a growing roster of innovative and nimble startup brands. As consumers increasingly seek fresh and healthy, further consolidation in the frozen foods category remains likely.