Kraft Heinz sells planters brand to Hormel Foods for US$3.35Bn to focus on core areas of focus

US – Kraft Heinz has entered into an agreement to sell its nuts business to Hormel Foods for US$3.35 in an effort to shore up its balance sheet and boost growth in its three main areas of focus — flavours, quick and easy meals, and snacking.

As part of the deal, Hormel will acquire most products under the Planters brand including single variety and mixed nuts, trail mix, Nut-rition products, Cheez Balls and Cheez Curls; as well as the Corn Nuts brand.

The sale of Planters, known for its more than 100-year-old top-hat wearing mascot Mr Peanut, follows an approach by Hormel — which owns Skippy peanut butter — to Kraft Heinz, according to people familiar with the situation. 

Upon completion of the deal the planters brand will join Hormel’s snacking portfolio that includes brands such as Hormel Gatherings, Columbus, Justin’s, Skippy, Herdez and Wholly.

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According to Kraft Heinz, the business being sold contributed approximately US$1.1 billion to its 2020 full-year net sales, primarily in the US segment.

The deal comes after Kraft agreed to offload part of its cheese business to Lactalis for US$3.2 billion last year, as the owner of Heinz Ketchup is seeking to improve its balance sheet and boost growth.

Under the terms of the agreement, Hormel Foods will take ownership of the Corn Nuts facility in California, as well as two Planters production facilities in Arkansas and Virginia.

The facilities and employees will continue to operate as normal.

Jim Snee, chairman, president and CEO of Hormel Foods, said: “Planters is an iconic leading snack brand with universal consumer awareness. The acquisition of the Planters business adds another US$1 billion brand to our portfolio and significantly expands our presence in the growing snacking space.”

New opportunity for growth for Kraft Heinz

For Kraft Heinz, the divestiture marks a momentous step in the rapid transformation of the company as it looks to improve its growth trajectory.

It comes as Kraft Heinz’s chief executive Miguel Patricio seeks to turn round a debt-laden business, many of whose brands had been losing market share before Covid-19 as the group cut costs and struggled to keep pace with consumer trends.

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According to a report by Financial Times, Kraft Heinz will use part of the proceeds of the Planters deal to expand its three main areas of focus — flavours, quick and easy meals, and snacking — along with helping to cut almost US$25bn of net debt.

Miguel Patricio, Kraft Heinz CEO, said: “It will enable us to sharpen our focus on areas with greater growth prospects and competitive advantage for our powerhouse brands.”

“Within our Real Food Snacking platform, this means more aggressively driving real fuel for kids through Lunchables and real meal alternatives like P3.”

The transaction for the peanut and snacks business is expected to close in the first half of 2021, subject to regulatory review and approval.

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