Coverage: Kellogg is selling its Keebler business to Ferrero

Kellogg Co. agreed to sell its Keebler cookie business and other snack and baked-goods brands to Ferrero Group for $1.3 billion in cash as it seeks to shift its portfolio toward products it believes have stronger growth prospects.

Micah Maidenberg of The Wall Street Journal had the news:

Battle Creek, Mich.,-based Kellogg said in November it was considering selling Keebler, Famous Amos and other cookie businesses as well as fruit-snacks brands. Ferrero will acquire those assets as well as Kellogg businesses that produce pie crusts, ice cream cones and cookies for the Girl Scouts.

The company hadn’t prioritized promotions and innovation investments in the cookie and fruit-snacks units in recent years. Kellogg will keep the rest of its snacks business in North America, including Pringles, Cheez-It snacks and Rxbar, a protein bar. It also owns cereal products including Frosted Flakes.

“This divestiture is yet another action we have taken to reshape and focus our portfolio, which will lead to reduced complexity, more targeted investment, and better growth,” Kellogg Chief Executive Steve Cahillane said in prepared remarks Monday.

Francesca Landini and Uday Sampath Kumar of Reuters reported that Kellogg is struggling to adapt to changing consumer tastes:

The deal comes as packaged food companies struggle to adjust to changing consumer tastes and rising demand for low-sugar, healthier items.

Kellogg’s fruit-flavored snacks, pie crusts and ice-cream cones businesses will also pass to the Italian confectioner as part of the deal.

Monday’s transaction is Ferrero’s fourth acquisition in the Unites States since 2017 as it looks to expand in a key market for chocolate and biscuits, an area where it is growing rapidly.

Giovanni Ferrero, Executive Chairman of the Ferrero Group, said in a statement that the Kellogg businesses were an excellent strategic fit for the family-owned group.

Next month Ferrero is expected to launch a new Nutella-filled biscuit in France, further expanding the reach of its chocolate and hazelnut spread, which was launched in 1964 by Giovanni’s father Michele Ferrero.

Christopher Doering of Food Dive reported that Ferrero wants to expand its U.S. business:

The acquisition by Ferrero — best known for its Nutella spread, Tic Tac breath mints and Ferrero Rocher candies — is the latest push by the company to expand its U.S. footprint.

In 2017, the Italian candy maker purchased Ferrara Candy — the maker of Brach’s, RedHots and Trolli — from private equity company L Catterton. Then last year, it spent $2.8 billion to acquire the U.S. candy operations of Nestlé, making it the third-largest confectionery company in the country. The deal added more than 20 American candy brands to the fold — including Butterfinger, Baby Ruth, 100 Grand, Raisinets, Wonka, SweeTarts, LaffyTaffy and Nerds, as well as the exclusive right to the Crunch brand.

Now Ferrero appears to be making its first foray into cookies and snacks with its purchase of the Kellogg division.