UPDATE: Feb. 11, 2021: Hormel Foods said it will purchase Kraft Heinz's Planters snack nut portfolio for $3.35 billion. The acquisition, which includes the Planters, Nut-rition, Planters Cheez Balls and Corn Nuts brands, is expected to close in the second quarter. The brands posted net sales of about $1 billion in calendar year 2020.
Kraft Heinz is nearing a sale of its Planters snack business to Hormel Foods, which also owns Skippy peanut butter and Justin's nut butters, The Wall Street Journal reported, citing people familiar with the matter.
The business publication said a transaction valuing the century-old brand at around $3 billion could be announced as soon as next week. Spokespeople from Kraft Heinz and Hormel each told Food Dive their respective companies do not comment on rumors or speculation.
A sale would mark the latest deal as large companies are overhauling their portfolios to jettison slower growing or non-core operations, while adding to the fold faster growing or trendier offerings. In September, Kraft Heinz announced it was selling its natural cheese business — including Breakstone’s, Knudsen, Polly-O, Athenos, Hoffman’s and Cracker Barrel in the U.S. — to Lactalis for $3.2 billion.
Nearly six years after Kraft and Heinz merged to become one of the world's largest consumer packaged goods companies, the food giant that owns iconic brands including Oscar Mayer meats, Maxwell House coffee and Jell-O, is slimming down.
The decision to unload the storied Planters brand — synonymous with its top hat-wearing and monocled Mr. Peanut mascot —could generate a huge cash windfall that Kraft Heinz could use to pay down debt, purchase companies in tune with today's trends or invest into refreshing other brands that have fallen out of favor with consumers. Last July, Kraft Heinz recorded a $290 million impairment charge related to Planters and six other brands.
Kraft Heinz has reportedly considered selling other parts of its business, including two years ago when it reportedly hired an investment bank to explore options for its Maxwell House coffee business. The brand remains in its portfolio today.
Kraft Heinz was once the darling of the food space for its acquisition prowess and high profit margins in the U.S. food industry. Its aggressive cost cutting following the merger helped boost the business in the short term, but left Kraft Heinz underinvesting in building brands and growing sales, especially in the face of the rapid shift by consumers toward healthier, fresher and natural items that clashed with many of the offerings in its portfolio.
Kraft Heinz CEO Miguel Patricio, who has been on the job since 2019, has been tasked with turning the business around. He unveiled a comprehensive strategy in September to reduce inefficiencies and reinvest in brands. The natural cheese business divestment was announced at the same virtual investor day meeting as the new strategy, and Patricio and Chief Financial Officer Paulo Basilio both said the sale of those brands resulted in a greater proportion of Kraft Heinz's portfolio being made of brands with the most growth potential.
This potential sale of Planters comes at a time when consumers are snacking more and are hungry for low-carb, high protein snacks. But the nut category as a whole is under intense pressure from other brands and private-label offerings, and shopper demand for products perceived as healthier could make Planters expendable.
For Hormel, the company could be adding to the mix a well-known brand that has been a household staple for decades. The Minnesota company has been a serial acquirer in recent years, adding to its portfolio natural and organic meat producer Applegate in 2015, natural and organic nut butter-based snack maker Justin's in 2016 and Columbus Craft Meats, a premium deli meat and salami company, a year later.
The addition of Planters would mark somewhat of a departure from its more recent purchases of premium brands, instead prioritizing a more mainstream offering. Still, Hormel, with Justin's and Skippy already in its fold, would no doubt be able to extract some synergies when it comes to nuts without worrying about too much overlap between the brands. If it does purchase Planters, Hormel could decide to move the brand into premium offerings where it has expertise.
Large food companies have been especially active in M&A, purchasing brands in high-growth areas. McCormick & Co. purchased hot-sauce maker Cholula from private equity company L Catterton for $800 million in cash last November. Mondelez International followed in January by purchasing Hu Master Holdings, a maker of premium snacks and chocolates made from simple ingredients. And earlier this week, Post Holdings lead a $12.5 million Series B funding round for PeaTos, a maker of pea-based snacks. As big food companies retool their portfolio, more brands are likely to be sold. Considering its new focus on growth, Kraft Heinz is likely to be a major player in some of these upcoming deals.