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
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...
"Skippy to be bought by maker of Spam "
The new product will be called Skam.
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!
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.
Copyright © 2014 Microsoft. All rights reserved.
Although geopolitical concerns factored into the modest retreat on Monday, the worries were cast aside today after separatist forces in eastern Ukraine handed over black boxes from MH17 to Malaysian authorities and Secretary of State John Kerry began working on brokering a ... More
More Market News
The company plans to close stores and lay off employees, and says it needs to make some deeper changes.
MUST-SEE ON MSN
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'