US – American multinational snack company, Hershey is buying fast-growing Dot’s Homestyle Pretzels and its Midwest co-manufacturer Pretzels Inc., in an effort to broaden its snacking portfolio.
The US$1.2 billion deal would be the second-largest of its kind in its history, according to Food Dive, and would enhance Hershey’s capacity to reach more consumers with a broader mix of salty and sweet offerings.
The purchase of the premium pretzel brand – known for its bold flavors including Southwest and Honey Mustard – would also hasten Hershey’s push into the permissible salty snack category.
Hershey would inherit a brand that has amassed a 9% market share in the US$2 billion pretzel category in only five years, giving it a strong footing in an area where it has previously been underrepresented.
“This is definitely a growth play for us,” Michele Buck, Hershey’s CEO, said in an interview. “They really caught our attention because their growth has been tremendous in the past year.”
Under Buck’s direction, Hershey, which has been known for its confections, has rapidly evolved into a “snacking powerhouse” by accelerating growth in its core confectionery business and also expanding into new snack offerings through a series of deals.
Some of its major deals, since Buck took over in 2017, include the acquisition of Pirate’s Booty and protein-bar maker One Brands, as well as investment in Quinn, a manufacturer of popcorn, chips, and pretzels.
The Pennsylvania-based company’s largest acquisition came nine months after Buck took the helm when it bought Amplify, the parent of SkinnyPop popcorn for US$1.6 billion.
Hershey’s appetite for growth has now turned to Dots, the fastest-growing offering in the pretzel category, according to the company, responsible for 55% of the segment’s growth during the past year.
In addition to its favorable growth profile, she said Hershey was captivated by Dot’s “intense flavor delivery” compared to other pretzels on the market that is reminiscent of what shoppers often experience in flavored chips.
Hershey also is separately purchasing Pretzels Inc. from private investment firm Peak Rock Capital, giving it access to three manufacturing locations in Indiana and Kansas used to make the salty snack for Dot’s and other customers.
The decision to purchase Pretzels, along with the Dot’s brand, will give Hershey more flexibility in increasing product output as demand for the snack grows.
Dot’s and Pretzels had net sales of about US$275 million for the 12 months ended September 2021, according to Hershey.
The combination of these two acquisitions is expected to be slightly accretive to reported earnings per share in 2023 and adjusted earnings per share in 2022.
The acquisitions are subject to customary regulatory approvals and are expected to close by the end of this year.
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