February 13, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

Post Holdings announced its formation of a pet food platform after signing a definitive agreement to acquire select pet food brands from The J.M. Smucker Co. in a $1.2 billion deal consisting of $700 million in cash and approximately 5.39 million shares of Post Holdings common stock. 

Under the terms of the deal, Post will acquire leading dog and cat food brands Rachael Ray® Nutrish®, Nature’s Recipe®, 9Lives®, Kibbles ‘n Bits® and Gravy Train®, which generated combined net sales of $1.4 billion in the year ending April 30, 2022. Post also will acquire manufacturing and distribution facilities in Bloomsberg, Pennsylvania, and manufacturing facilities in Meadville, Pennsylvania, and Lawrence, Kansas. 

“We expect this acquisition to continue our history of creating value with a buy and build approach to categories,” said Rob Vitale, president and CEO, Post. “These iconic brands are ideally suited to this strategy. Most importantly, I am delighted to welcome the over 1,000 talented people who will join us as Post colleagues.”

Increased humanization of pets by highly engaged consumers is leading purchasing trends in the pet food industry to parallel those in the human food sector. The health consciousness and concern over sustainability that are driving consumers’ choices for themselves and their families are also increasingly driving their food choices for their pets.

Specialty pet foods and treats are outperforming traditional offerings according to Pet Food Industry.com, with the bulk of the products in these two categories falling under the classification of “premium”, “super-premium”,  “organic”, or “natural”.

Likewise, the global pandemic has proven to have an outsized influence on the market. Greater social isolation and more people working from home have translated into an upswing in pet ownership. 

As a result, the global pet food market, which was valued at US$110.53 billion in 2021, is expected to grow at a CAGR of 5.11 percent to reach a value of US$163.7 billion by 2029 – as compared to the U.S. CPG sector, which currently sees industry growth between 2-3 percent. 

This significant investment by Post Holdings is giving the company what it calls “a compelling entry point” into this high-potential, high-growth category – noting that it will provide it an established, scaled position in the mainstream and entry premium sub-categories. 

J.M. Smucker commented that the divestiture will allow the company to pursue its strategy of prioritizing its capital and resources into its strongest growth areas of business. 

“Portfolio optimization and strategic resource allocation remain key drivers of our long-term growth,” said Mark Smucher, chair of the Board, president and CEO, The J.M. Smucker Co. “The execution of this proven strategy has helped us streamline our business, improve margin mix, and position the Company to deliver continued shareholder value.”

Upon the expected closing of these acquisitions in Q2 2023, Post stated that it expects to create a new pet food platform within Post Consumer Brands, with Nicolas Catoggio, the current  president and CEO of Post Consumer Brands, expanding his responsibilities to include the management of both the North American ready-to-eat cereal and peanut butter business, and the new pet food business. 

Once established, Post expects its pet food business to be immediately accretive to its cash flow, contributing approximately $100 million of adjusted EBITDA in the first 12 months, and for it to result in tax benefits to the company with a net present value of approximately $120 million. 

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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