Photo by Denny Müller on Unsplash
By Dennis Limmer
Source: retailwire.com, August 2024
Mars has made a big move in the snack industry by acquiring Kellanova for $35.9 billion in a deal that highlights Mars’ ongoing growth strategy. By purchasing Kellanova at a 44% premium per share, Mars is set to expand its global snacking footprint with popular brands such as Pringles and Cheez-It. This acquisition is expected to enhance Mars’ offerings in health and wellness while solidifying its position in the snacking sector.
The deal is slated to be approved and close in the first half of 2025, and it ranks among the top 10 global food and beverage mergers since 1995 and is the fourth-largest M&A deal of the year, as reported by CNN. With this latest acquisition, Mars continues to build on its recent buying spree, which has included notable brands like KIND Bars, Trü Frü, and Hotel Chocolat.
Mars’ CEO, Poul Weihrauch, emphasized in the company’s press release the opportunity to integrate Kellanova’s legacy brands into Mars’ portfolio. “In welcoming Kellanova’s portfolio of growing global brands, we have a substantial opportunity for Mars to further develop a sustainable snacking business that is fit for the future,” he said.
Per the Associated Press, “It is the biggest deal in the sector since J.M. Smucker bought Hostess for $5.6 billion last year.”
The acquisition of Kellanova will also boost Mars’ presence in the salty snack category, complementing its existing brands like Combos and Ben’s Original. While Mars is primarily known for its chocolates, candies, and pet food — such as M&M’s, Skittles, Pedigree, and Royal Canin — its chocolate sales have recently declined. U.S. chocolate sales have dropped by 5.5% over the past year as cocoa prices have skyrocketed and consumer preferences have shifted toward other flavors.
If the deal is approved by regulators and shareholders, Mars would gain substantial buying power with suppliers and increased leverage in negotiations with grocers and other retailers, according to Randal Kenworthy, a senior partner at consulting firm West Monroe. He explained that the combined entity of Mars and Kellanova would hold approximately 8% of the U.S. snack market, close to PepsiCo’s 9% share, which includes Frito-Lay. Kenworthy added that Kellanova’s larger international presence will also assist Mars in expanding its reach into global markets. Additionally, the acquisition would allow for crossover flavors and branded snack items that were not possible previously.
As reported by ProFood World, Mars generated $50 billion in revenue in 2023, with $18 billion coming from its snacking division, which includes popular products like Snickers, Starburst, Extra and Wrigley chewing gums, Altoids, and Dove chocolate.
Last December, Forbes shared an exclusive story on Mars and how it plans to target a significant increase in its snacking division over the next decade, aiming to double its annual revenue from $18 billion to $36 billion. Achieving this goal would further boost the company’s overall revenue, which was $47 billion in 2023 and $50 billion in 2023.
However, Mars might still be behind in at least one major snack category. According to Hershey, “With increasingly on-the-go lifestyles, Americans are reaching for snacks to satisfy their hunger cravings between meals, and some are using them to replace meals entirely.” Retailers and manufacturers have introduced single-serve, grab-and-go products to meet these demands.
Per Packaging Corporation of America, the lines between mealtime and snack time have now blurred, especially for younger Americans. David Walsh, VP of membership and communications for SNAC International, cited the fact that 92% of younger Americans replace one meal a week with snacks. “A lot of these younger people aren’t eating three square meals a day. They are eating five or six smaller meals, and many are snacks,” he explained.
And with this comes the need for healthier snacks. “According to ingredients provider ADM, 31% of people are buying snacks focused on health, with 50% preferring snacks featuring beneficial ingredients,” Packaging Corporation of America reported.
Hershey shared similar findings, noting that while all snack categories, from dairy to sweets, have seen growth, “products that call attention to specific healthful claims are driving the strongest uptick in sales.”
As consumers become more health-conscious and increasingly seek out better-for-you snacks, Mars may need to adapt its offerings to align with these evolving preferences. With this acquisition, it seems to already be taking a step in that direction. According to the press release, acquiring Kellanova will “expand the Mars health & wellness Snacking portfolio with the addition of new complementary products like RXBAR and NutriGrain to reflect global trends and preferences.”
