- McKee Foods, the maker of Little Debbie Snacks, Drake’s cakes and other snack foods, will expand its operations in Collegedale, Tennessee, the company said in a statement.
- The company plans to invest more than $500 million during a 15-year period. The expansion will create about 480 jobs and add new production lines.
- McKee Foods has been headquartered in Tennessee for longer than 70 years. It currently employs more than 3,000 people.
McKee Foods, a privately-held company, currently posts annual sales of about $1.4 billion. According to its website, the company began during the Great Depression when founder O.D. McKee began selling 5-cent snack cakes from the back of his car. Today, it makes treats such as Little Debbie Snacks, Drake’s cakes and Sunbelt Bakery snacks and cereals.
The well-known roster of brands places the Tennessee company in direct competition with snack giants such as Hershey and Mondelez International, as well as smaller food makers like Hostess. The fact that McKee Foods is private enables it to make major investments in its operations — including, in this case, investing a third of its annual sales in the plant expansion — without having to answer to shareholders.
As food and beverage companies cut jobs or consolidate plants, snacks, proteins and plant-based meats are three pockets of growth. Just this week, Impossible Foods announced it closed a $500 million funding round to invest in more research and innovation, help it scale up and expand its retail presence.
To be sure, the expansion of McKee's Collegedale facilities comes during a 15-year time frame. Still, it shows confidence among executives at the mid-size business that they expect to remain competitive against deeper-pocketed players. The longer window also allows McKee to increase its investment in snacks that get particularly popular or incorporate other trends into its operations.
According to a study Mondelez conducted with The Harris Poll last year, snacking is preferred to eating meals for 59% of adults worldwide. For millennials, that figure jumps to 70%. The results found catering to indulgence might actually be an asset rather than a problem; 83% of respondents indicated an otherwise balanced diet can contain some indulgence. Four in five adults appreciated having both healthy and indulgent snacks readily available.
That places McKee Foods is an ideal position going forward, and potentially makes it an acquisition target for CPGs looking to expand their snacking portfolios to better meet today's food trends. Snacking has been a popular target for M&A during the last few years as the space has grown in popularity.
Hostess Brands acquired Voortman, a manufacturer of premium, branded wafers and sugar-free and specialty cookies, for $320 million in January. Kellogg unloaded a collection of well-known brands such as Keebler and Famous Amos to Ferrero for $1.3 billion in 2019, and Hershey in recent years has snapped up the parent company of popcorn maker SkinnyPop for $1.6 billion and the manufacturer of Pirate's Booty cheese puffs. Mondelez added to the fold Tate's Bake Shop for $500 million in 2018.
While McKee as a company may not be widely known among consumers, its brands are household names. Now, the company stands to be an even bigger player going forward with its half-a-billion investment placing it in a better position to churn out more sweet treats to meet growing consumer demand for snacks.