Skippy buy moves Hormel away from meats
The Hormel Foods Corp.'s purchase of Skippy peanut butter business from Unilever for $700 million in cashadds to the company's growing stable of foods that do not contain any meats.
That includes Wholly Guacamole and a wide variety of Mexican foods and several of its Country Crock side dishes.
"We're still very enthusiastic about our meat portofolio, but we have been making a very deliberate effort to become a bigger player in general packaged foods," Jeffrey M. Ettinger, chief executive of Hormel, said.
Many of the company's acquisitions reflect an effort to appeal to the growing ethnic diversity of American consumers, as well as their increasing awareness of the role that food plays in health. Mr. Ettinger noted, for instance, peanut butter's high protein content as one attraction in the acquisition.
Unilever, the British-Dutch food and consumer products giant, announced in October that it was considering selling Skippy, the No. 2 peanut butter brand in the United States, behind J.M. Smucker's Jif. Skippy has annual sales of roughly $370 million, with $100 million of that coming from outside the United States.
One attraction for Hormel is that Skippy is the leading brand in China, where peanut butter is in a relatively small number of households, but is growing rapidly. Skippy sales in China account for between $30 million to $40 million of the $100 million in international sales.
"Outside the U.S., peanut butter is a growth story," Mr. Ettinger said. "Skippy has a good franchise in Canada, it's growing in Mexico, and we really see opportunity in Asia."
Skippy is the biggest acquisition by Hormel, known primarily for its meats business. Nonfrozen grocery products account for 14 percent of its annual revenue, according to Thomson Reuters data. Its brands include Chi-Chi's, Dinty Moore, El Torito and perhaps its best known, Spam.
The last big purchase by Hormel, based in Austin, was its $334 million acquisition of the Turkey Store Company in 2001, according to Standard & Poor's Capital IQ data. The company said it expected that the Skippy acquisition would add 13 to 17 cents to earnings per share in its 2014 fiscal year.
In August 2011, MegaMex Foods LLC, a joint venture between Hormel and Herdez Del Fuerte, acquired Fresherized Foods, the maker of Wholly Guacamole and Wholly Salsa products. The company did not disclose the amount spent on this acquisition.
Monday's acquisition includes Unilever's Skippy production plants in Little Rock, Ark., and in Weifang, China. "It will be our third facility in China producing on a daily basis," Ettinger said.
He said he had been hearing all morning about different combinations of peanut butter, ranging from peanut butter and pickles to peanut butter and bananas and peanut butter and bacon, a favorite of a former Hormel chief executive.
"I'm kind of a traditionalist, I guess, because I like to have peanut butter – and it's Skippy, actually – several mornings a week on a toasted English muffin," Mr. Ettinger said.
Skippy was first sold by the Rosefield Packing Company of Alameda, Calif., in 1933, according to a corporate Web site. Chunky peanut butter was introduced the same year. (One fun fact: It takes 772 peanuts to make a single 16.3-ounce jar of Skippy.)
Unilever has a huge portfolio of food and household goods brands, including Ben & Jerry's ice cream, Dove soap and Lipton and PG Tips teas. It has shed brands in North America and Europe to focus on faster-growing emerging markets, which now account for more than half the conglomerate's sales.
Barclays is advising Hormel Foods. Lazard and the law firm of Cravath, Swaine & Moore advised Unilever.