Hormel's $700 million bet on peanut butter

The company is buying the Skippy brand from Unilever. Hormel sees potential there, but the allergy stigma weighs down sales.

By Jonathan Berr Jan 3, 2013 11:20AM
Image: School lunch (Stockbyte/SuperStock/SuperStock)Hormel (HRL) will buy Skippy peanut butter from Unilever (UN) for $700 million -- about twice the price Wall Street had expected -- adding the iconic brand to its product line-up that includes Spam processed meat and Jennie-O Turkey products.

The deal is not a surprise. Unilever, an Anglo-Dutch conglomerate, has been trimming its portfolio of underperforming brands for months. As Bloomberg News noted in October, Skippy is a distant second to J.M. Smucker's (SJM) Jif in the U.S. peanut butter market. The sources the news service quoted expected the Skippy business to fetch between $300 million and $400 million.

Hormel sees some potential in Skippy and its 14 varieties. The Austin, Minn., company points out that the 80-year-old brand is the leader in the fast-growing category of natural peanut butter. Skippy, with annual sales expected at $370 million, is the top peanut butter brand in China. Peanut butter is a $2 billion market and is the second most popular sandwich ingredient behind ham in the U.S. The product, however, has an image problem.

As any parent with young children knows, there is a rising awareness of the dangers of peanut allergies. Many schools are "peanut-free zones" because some kids are so sensitive that they can't even be in the same room with peanuts. Some sufferers go into shock from even the tiniest exposure. In rare cases, the allergies can be fatal.

One study found that the incidence of peanut allergies doubled in children between 1997 and 2002, according to the Food Allergy and Anaphylaxis Network. Scientists aren't sure why more kids are sensitive to peanuts now than in previous decades. About 20% of children with peanut allergies do outgrow them. 

Wall Street likes the acquisition. Shares of Hormel were up in early trading because the company expects Skippy to be "modestly accretive" in fiscal 2013 and add 13 cents to 17 cents per share the following year.

--Jonathan Berr does not own shares of the listed stocks.  Follow him on Twitter @jdberr.

More on Money Now


Tags: Food
55Comments
Jan 3, 2013 6:53PM
avatar
i hate when my poop comes out like skippy peanut butter !
Jan 3, 2013 6:48PM
Jan 3, 2013 6:47PM
avatar
phuck food allergies ,just put the defective children in there own school ,stop punishing the masses for a few with defects in the population !!!!!
Jan 3, 2013 6:36PM
avatar
Let's see. Chocolate in peanut butter, jelly mixed in peanut butter, spam and its gelatin mucous surrounding it in peanut butter I don't think so.
Jan 3, 2013 6:35PM
avatar
Fried spam (till its crunchy like bacon) on top of steamed rice , two eggs on top of that with some soy sauce.  Heaven on earth for breakfast on weekends!
Jan 3, 2013 6:30PM
avatar
Ummmm ... I think I'll go to the kitchen and prepare myself a peanut butter & jelly on toast and a large glass of 2% milk. (better than steak)
Jan 3, 2013 6:28PM
avatar

What happened to parental supervsion?

If you are an adult ,with peanut or nut allergies. use the appropriate caution.

 

It is'nt the manufactures fault.

Jan 3, 2013 6:26PM
avatar
PB & JELLY! an American Staple! SKIPPY'S THE BEST!
Jan 3, 2013 6:19PM
avatar
The threat of food allergies has been greatly exaggerated
Jan 3, 2013 6:10PM
avatar

i likings of the skippy with a side of fried spam

Jan 3, 2013 6:00PM
avatar

I agree leave go ol skippy alone!  I am so old I remember when it came in glass jars!  Also, keep it made in America!!  Bad enough my twinkies are gone but don't take away my skippy too!

Jan 3, 2013 5:59PM
avatar
Spamippy will be the future product, yum sounds delicious.
Jan 3, 2013 5:55PM
avatar
It's just the end of the world as we know it---
Jan 3, 2013 5:54PM
avatar

Makes perfect sense, because choosy mom's choose Spam!!!

Jan 3, 2013 5:48PM
avatar

I don't recall any kids when I was in school having problems with peanut butter....

They served it in the lunch room and our Mothers used it in our sack lunches...

But something must have changed...and I don't think it was the peanuts...

Jan 3, 2013 5:32PM
avatar
You can bet "It's going to be Spam-Skippy" too!  *I couldn't resist*
Jan 3, 2013 5:28PM
avatar
jif is the only peanut worth while eating!!!!!
Jan 3, 2013 5:27PM
avatar
first the twinkies, now skippy PB, what's next??????????
Jan 3, 2013 5:15PM
avatar
Skippy Peanut Butter and Sliced Sweet Pickle Sandwiches are awesome.
Jan 3, 2013 5:14PM
avatar
Spam is the favorite food of your president
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The stock market has languished today, yet it's a stretch to say that sellers have been in total control of the proceedings.

The A/D line at the NYSE favors decliners by a slim 8-to-7 margin; meanwhile, advancers are actually ahead of decliners at the Nasdaq by nearly an 8-to-5 margin.

Those A/D lines pretty much sum things up in the sense that they convey some mixed trading action, which has persisted for most of the day.

Notably, the Russell 2000 is making a ... More

MSN MONEY'S