USA – General Mills Inc. has entered into the pet food industry by acquiring Blue Buffalo Pet Products, a brand which makes natural food for dogs and cats in a US$8 billion deal.
Blue Buffalo will operate as a separate unit within General Mills and its CEO Billy Bishop will continue to lead the business.
The announcement marks a major move in the food industry, seeking to enter the fast-growing pet food industry to counter the declining demand for sugary, preservative filled items.
General Mills declared low sales and weaker profits for its lackluster cereal and Yoplait yogurt despite a move it made earlier to embrace diversification.
To the company, the acquisition is quite substantial and gives it a stable outlook despite the fact that General Mills’ profit was reported to dip 3% in early trading, as reported by Standard & Poor.
General Mills, best known for cereal brands like Cheerios and Wheaties, could be eying the robust beverage, snack food and pet food, which have affirmed good business especially for the retail chain.
The company diverted investment into the snack bar business with acquisition of Humm Foods, maker of Larabar and Larabar Jocalat, vegan and gluten-free energy bars.
Apart from Cascadian Farm and Muir Glen brands, it also owns the Nature Valley, a snack bar brand comprised of Granola Bars, Crunchy, Oats and Dark Chocolate.
General Mills has a strong focus on developing quality products that contribute to healthy living through its Bell Institute of Health and Nutrition (BIHN), and now Blue Buffalo, with its organic products, is a good fit for the company’s health conscious image.
The company said that the acquisition will be funded with debt, cash on hand and about US$1 billion in equity and they believe it will help boost sales and add to the company’s earnings in the next two years.
The acquisition was well promising as Blue Buffalo Pet Products climbed after General Mills agreed to buy the upscale pet-food maker, a Financial Times report said.
“In pet food, as in human food, consumers are seeking more natural and premium products,” General Mills Chief Executive Officer Jeff Harmening said in a statement.
However, the acquisition was open to other bidders such as Mars, Cargill and Nestle.