December 20, 2017

Campbell Soup Company announced it has agreed to acquire leading snack company Snyder’s-Lance for $4.87 billion in cash. Campbell Soup plans to finance the transaction via a combination of long and short-term debt totaling $6.2 billion.

The deal marks the largest acquisition in Campbell Soup’s history, and underscores the continuing strategy by major CPG companies to consolidate in the face of dwindling returns, as well as the objective of gaining market share in the U.S. snack market worth $89 billion.

Under the terms of the deal, Campbell will pay $50 per share, representing a 6.8 percent premium to Snyder’s-Lance’s closing on Friday December 15 and a 27 percent premium to the company’s close on Wednesday December 13.

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.

Like many large CPG companies, Campbell Soup has found it challenging to respond rapidly enough to shifting consumer demands. As a result the company has set out on a plan to diversify its business, striking out to gain a foothold in some of the most rapidly growing food segments.

“We experienced significantly lower consumption across almost all of our categories… we felt it most acutely in February,” Campbell Soup Chief Executive Denise Morrison said on a post-earnings call earlier this year reports Reuters.

In response, Campbell Soup has undertaken some strategic moves in an attempt to broaden its consumer appeal.  Less than six months ago the company announced it had agreed to pay $700 million in cash for Pacific Foods, a leading producer of organic soups and broth, as well as shelf-stable, plant-based meals, beverages, and side dishes. Other recent deals include paying $1.55 billion for Bolthouse Farms’ natural fruit juice business; acquiring Garden Fresh Gourmet for $231 million; making an undisclosed investment in the startup Juicero Inc.; and announcing in June 2015 that it was removing all artificial coloring and flavoring from its North American product line by the end of FY 2018. This latest deal for Snyder’s-Lance is a definitive move to gain a sizeable chunk of the U.S. snacking market.

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.

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.

In fiscal year 2017, Campbell Soup’s existing snack portfolio, which includes Pepperidge Farm, Arnott’s, and Kelsen, generated $2.5 billion in net sales. However, once Snyder’s-Lance complementary lines are added to Campbell’s Global Biscuits and Snacks division, Campbell Soup’s snacking business is expected to account for 46 percent of Campbell Soup’s total annual net sales.

“The acquisition of Snyder’s-Lance will accelerate Campbell’s strategy and is in line with our Purpose, ‘real food that matters for life’s moments,’” said Morrison. “ It will provide our consumers with an even greater variety of better-for-you snacks. The combination of Snyder’s-Lance brands with Pepperidge Farm, Arnott’s and Kelsen will create a diversified snacking leader, drive sales growth and create value for shareholders.”

This “Purpose” by Campbell Soup, which is clearly evident through its recent string of acquisitions, aligns with the shift in how consumers view food and nutrition and their role in a healthy and fulfilling lifestyle.

Consumers are more often opting for snack foods as health plays a greater role in food choices, and younger consumers blur the lines between snacking and formal meals, reports Food Dive.

Today, 24 percent of all snack foods are eaten during meal times, according to a report issued by The NPD Group, compared to 21 percent five years ago – a trend that is expected to continue, with expectations that the trend will increase by another 12 percent.

“Campbell’s expertise in brand-building, R&D, and supply chain and operations, coupled with Snyder’s-Lance’s well-known portfolio, distribution system and history of strong sales growth, will allow us to create a differentiated, branded snacking business with greater scale,” said Luca Mignini, president, Global Biscuits and Snacks division of Campbell Soup. “The combined portfolio will be even more relevant to consumers who are increasingly seeking better-for-you snacks.”

-Lynda Kiernan