December 29, 2017

Hershey has expanded its position in the snacking market with the acquisition of Amplify Snack Brands Inc. for $12 per share, or $1.6 billion.

The all-cash deal is indicative of the strategic plan of consolidation in the face of dwindling returns and expanding beyond chocolate for new Hershey CEO Michele Buck following Hershey’s rejection of a $23 billion takeover by Mondelez last year.

This drive was echoed by company CFO Patricia Little who recently said, “Nothing is as profitable as our core products… But we need to expand our portfolio,” reports CNBC.

The company has been  consistently very clear in the past that it desires to remain independent, announcing in June 2016, “The board of directors of the company unanimously rejected the indication of interest and determined that it provided no basis for further discussion between Mondelez and the company.”  This statement was followed by management expressing in March of this year at an investor meeting its goal of pursuing growing companies in the U.S. snacking sector.

The addition of Amplify to Hershey’s existing portfolio of approximately 80 brands names is expected to produce an annual run-rate of synergies totaling about $20 million over the coming two years.

“The acquisition of Amplify and its product portfolio is an important step in our journey to becoming an innovative snacking powerhouse as together it will enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snack aisle,” said Michele Buck, president and CEO of The Hershey Company . “Hershey’s snack mix and meat snacks products, combined with Amplify’s Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands.”   

Snack-down

Over the past years snacking has demonstrated continued growth as a consumer trend. However, this growth has recently accelerated with 76 percent of consumers snacking in 2014 increasing to 83 percent of consumers in 2016, according to Technomic. Indeed, as more consumers look to adopt a ‘balanced diet’, snacking is shedding its perceived bad reputation with the number of consumers eating five or more snacks per day rising 2.7 percent year-on-year – from 11.5 percent in 2016 to 14.2 percent in 2017, according to the report, 2017 State of the Snack Food Industry published by IRI.

Meanwhile, consumption of chocolate-centric foods declined in volume by 5,000 metric tons between 2010 and 2015, and is predicted to fall by another one percent between 2016 and 2021,  according to Euromonitor, reports the Motley Fool.

These trends have peaked the interest of large, iconic companies seeking to tap into today’s consumer habits, and Hershey’s is not alone in paying the price for a share of that market.

Less than two weeks ago, Campbell Soup Company announced its largest acquisition in company history, buying leading snack company Snyder’s-Lance for $4.87 billion in cash.

Headquartered in Charlotte, North Carolina, Snyder’s-Lance is the second largest salty snack company in the U.S. after Frito-Lay. It makes and markets snacks including pretzels, crackers, potato chips, cookies, tortilla chips, popcorn, nuts, and restaurant style crackers which are sold under 18 brands and other third party brand names through national grocery stores, convenience stores, club stores, food service operations, and mass merchandisers.

“This acquisition will dramatically transform Campbell, shifting our center of gravity and further diversifying our portfolio into the faster-growing snacking category,” said Morrison, president and CEO, Campbell’s Soup.

Amplification

Not only does the addition of Amplify give Hershey a greater presence in the snacking sector, it also increases its presence in the rapidly growing “better for you” snack category with brands such as SkinnyPop, Oatmega protein bars, Tyrell’s potato chips, and Paqui tortilla chips – all names that highlight their healthier ingredient lists.

“Since Amplify’s inception in 2014, our company’s goal has been to bring transparency to our products, and clean ingredients and great tasting snacks to consumers,” said Tom Ennis, president and CEO of Amplify. “This transaction is a continuation of our mission as Hershey also believes in bringing to consumers great-tasting snacks made with the best ingredients possible.”

The Boards of Directors of both companies have voted their approval of the deal which is expected to close in the first quarter of 2018, though the deal remains subject to approval by a vote of Amplify’s shareholders, and standard regulatory clearances.

-Lynda Kiernan