Kellogg Will Acquire Protein-Bar Maker -- WSJ
October 07 2017 - 3:02AM
Dow Jones News
By Annie Gasparro
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 7, 2017).
Kellogg Co. plans to buy niche protein-bar company RXBAR for
$600 million, joining other big food makers in tapping new brands
to make up for falling sales of sugary, processed products.
Kellogg mainstays like Frosted Flakes and Pop-Tarts have faced
declining sales in recent years. Chief Executive Steven Cahillane,
who took over this week from John Bryant, is tasked with bringing
the company more in line with the turn many consumers are making
toward more natural, fresh foods.
Many of Kellogg's competitors are also buying newer brands to
adapt. Conagra Brands Inc. earlier this year bought Duke's meat
snacks and recently said it would buy Angie's Boomchickapop
popcorn. Campbell Soup Co. in July said it was acquiring Pacific
Foods, an organic soup maker, for $700 million. And last year,
General Mills Inc. bought EPIC Provisions meat snacks.
But in buying buzzy smaller brands, these giants risk depriving
these startups of the identity that made them attractive to
consumers. Kellogg acquired Kashi in 2000 and made big changes to
the cereal maker's marketing and innovation strategy, only to see
it lose ground to newer all-natural brands.
The 25 largest food and beverage companies have lost billions of
dollars in market share in recent years, consultancy A.T. Kearney
said. Those companies averaged 2% annual sales growth from 2012
through 2016, compared with 6% growth for their smaller rivals, the
company said.
After moving Kashi's operations from Southern California to
Kellogg's headquarters in Battle Creek, Mich., executives realized
they were hurting Kashi's brand identity and move it back to the
West Coast.
"Kellogg learned some lessons with Kashi. We won't compromise
our values, " RXBAR co-Founder and Chief Executive Peter Rahal
said.
Mr. Rahal said his company will continue running its business as
a separate unit out of Chicago, but will benefit from Kellogg's
distribution, research and development capabilities. Mr. Rahal said
he wants Kellogg to help his brand grow beyond protein bars and
sell his products in more schools, hospitals and hotels.
The Wall Street Journal reported in September that RXBAR was
exploring a sale. The Chicago-based company had $7 million of
earnings before interest, tax, depreciation and amortization in
2016 and is projected to generate more than $20 million of Ebitda
in 2017, according to people familiar with the matter.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
October 07, 2017 02:47 ET (06:47 GMT)
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