‘A real strategic shift’
Mr. Clarke, who has been observing the industry for more than two decades, noted a significant shift in acquisition strategy in recent years.
“I think the strategics really woke up and said, ‘We have to reformat our product offering,’” he said, citing Hormel and B&G Foods as examples. “They just didn’t have the product offering to make the analysts happy. They would never have looked at $200 million-revenue businesses before, but they are clearly willing to buy them today, and that has been a real strategic shift — big food companies buying sub-$500 million-revenue businesses. And they’re doing it all day long.”
More companies are diversifying into entirely new categories and distribution channels through acquisition. WhiteWave, for example, entered the packaged salad category two years ago with its acquisition of Earthbound Farm for $600 million. B&G Foods’ Green Giant deal marks the company’s foray into frozen foods. And the Hershey Co., Hershey, Pa., surprised the investment community with its purchase of Krave jerky earlier this year.
Not all such strategic plays are successful, however. Omaha-based ConAgra, for example, is selling its private brands business less than three years after acquiring it.
“That was the $2.5 billion mistake that ConAgra made,” Mr. Clarke said. “Jumping into private label and not understanding the category they just bought.”