M&A for Manufacturers
The Business of Food
by Jennifer Barney
M&A for Manufacturers
1-min read
If you self-manufacture or are a co-man, what you may have found notable about the Hershey acquisition of Dot’s Pretzels this month is that it included the purchase of Dot’s contract manufacturer, Pretzel Inc.
This combined deal is the second largest acquisition ever for Hershey at $1.2B.
Legacy CPGs go into acquisition mode when they want to grow. The name of the game historically has been: buy an emerging competitor, fold them into existing capabilities, lower the overhead and capture value. Acquisitions happen because the value to the acquirer is an instant gain of new consumers.
We are now seeing more vertical acquisitions by operationally focused CPGs like Hershey. Since inception, Hershey has been a strong self-operator and protective of their IP. (I once visited their facilities, touring various plants including their pilot plant, but excluding their Reece’s plant, because I was a nut butter competitor, lol).
In order to gain a bigger foothold in the salty snacks category, Hershey identified pretzels as the space, and to secure Dot’s proprietary pretzel making process, purchased the co-man.
Similarly, Savencia Fromage & Dairy’s recent acquisition of hummus brand Hope Hummus included the manufacturing. It marks a shift beyond their core cheese business (owners of Alouette, Ile de France and more), into plant-based, natural products. They could have acquired another hummus brand, or a different plant-based product altogether, but Hope Hummus has the unique HPP equipment, making them a more attractive acquisition.
If you’re a brand that manufactures and you’re seeking an exit, take note: strategic deals are attractive when you have a process not easily duplicated and/or that involves defensible IP. If this describes you, then the odds are in your favor.
All my best,
Jennifer
The USDA is investing $20.2 million in the Dairy Business Innovation (DBI) Initiatives to spur regional dairy innovation by assisting dairy businesses in developing higher value uses for their milk, diversifying their markets and income, and realizing increased returns. Learn more
I'd love to hear from you - get in touch at jennifer@3rdandbroadway.com