Hershey is buying two popcorn operations from a co-manufacturer as the snacks maker aims to increase production capacity and flexibility for its fast-growing SkinnyPop brand.
The confectionery and salty snacks giant is purchasing the plants, which are located in Indiana and Pennsylvania, from bulk popcorn giant Weaver Popcorn. The purchase price and when the deal, which needs to get customary regulatory approval, will be completed were not disclosed.
The deal is the latest in a series of manufacturing and brand acquisitions by Hershey, best known for Kisses, Reese’s and other confections, since 2017 that has rapidly given the company a commanding presence in the ultra-competitive $36 billion salty snacks category.
Kristen Riggs, who oversees Hershey’s $1.2 billion salty snacks business, said in an interview that “not having any of our own popcorn manufacturing was an opportunity we wanted to address quickly.” Hershey currently owns some manufacturing capacity for its other two salty snacks brands, Pirate’s Booty puffs and Dot’s Homestyle Pretzels.
“The key is to be able to have a runway to keep this growth accelerating ... without any restraint,” Riggs said in an interview. “We're thinking about the salty business as a scaling business for us, a growing business for us, and our capabilities need to scale and grow to enable us to achieve the ambition we have.”
Sales of salty snacks at Hershey contribute to about 10% of the company’s more than $10 billion in annual sales. Hershey is looking to grow the division to about 20% of the company’s sales, or about $3 billion, within a decade.
A key strategy of Buck’s shift into salty snacking is through acquisitions.
SkinnyPop, a favorite of Hershey CEO Michele Buck, is a big part of that ambition. Buck purchased Amplify, the parent company of popcorn brand SkinnyPop, for $1.6 billion in 2017, the largest deal in its history.
When Hershey acquired the brand, SkinnyPop recorded sales of roughly $200 million a year. Today, sales, which have posted a compound annual growth rate of 16.3% during the last three years, are close to $550 million. The brand now has a presence in all major retailers.
The decision by Hershey to acquire production capacity for its popcorn business is similar to one the company made two years ago when it purchased co-manufacturer Pretzels Inc. and its three plants at the same time it acquired Dot’s.
Even though SkinnyPop is the second-best-selling brand by retail sales in ready-to-eat popcorn, it’s only present in 15% of households — giving Hershey optimism that there is substantial room for additional expansion. The Weaver plants being acquired are responsible for more than half of SkinnyPop’s annual production.
“This capability will be an accelerator for us on growth, on margin, and allow us to invest and grow an iconic brand like SkinnyPop,” Riggs noted.
For Hershey, the ability to bring some popcorn production internally will create a host of benefits, she said.
Hershey will be able to change production lines in as little as a week to adjust to changing consumer demand for a particular product or to quickly introduce a new offering to the market. Co-manufacturers often work with several clients and typically set production schedules on a monthly or quarterly basis, making it difficult for unexpected production changes to get incorporated in.
The ownership of the facilities will enable Hershey to become more intimately familiar with popcorn since it will be directly involved in making it, providing the company with valuable insight that will assist in product innovation. It also gives Hershey more flexibility to reach new consumption occasions because it can more seamlessly roll out new product innovations or packaging types.
The purchase of the plants will allow Hershey to control more of the entire production process so it can better prepare for and manage disruptions in the supply chain.
“Our intent is to continue to invest in the capabilities as we scale and grow the salty snacks business,” Riggs said. “This is right in line with that strategy.”
Riggs said Hershey will continue to work with Weaver and other co-manufacturers who produce popcorn after the deal closes. Weaver has been producing popcorn for SkinnyPop since the brand was introduced in 2010.