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.
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
- US sees best auto sales since 1973
- Stocks open higher for 5th straight year
- NJ Gov. Christie slams GOP leadership
"Skippy to be bought by maker of Spam "
The new product will be called Skam.
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.
[BRIEFING.COM] The stock market finished a down week on a cautious note with small caps leading the retreat. The Russell 2000 lost 0.5%, widening its weekly decline to 2.6%, while the S&P 500 shed 0.3%. The benchmark index ended the week lower by 2.7%.
This morning, the market was provided a basis to rebound with the July employment report, which was just right for the policy doves (209K versus Briefing.com consensus 220K). It showed payroll growth that was weaker than expected, ... More
More Market News
The company complains after the son of Florida State's football coach is televised wearing -- gasp -- Under Armour.
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'