LONDON (Brand Republic) – Cereal giant Kellogg’s is adding to its strength as a convenience food player with the acquisition of the US’s second largest biscuit manufacturer, Keebler, in a $3.6bn cash deal.
The deal ends weeks of speculation about Keebler’s future after a restructure by majority shareholder Flower Industries to concentrate on fresh baked goods left it out on a limb. Keebler owns the Cheez-It savoury cracker brand.
The purchase has been seen as a bold move for Kellog’s chief executive, Carlos Gutierrez, who has struggled to streamline the company, change its insular culture and lowered its dependence on the stagnant cereals market.
All this while coping with disappointing third quarter results and a profits warning for the fourth. Sales fell to $1.85bn from $1.87 for the same period last year.
Sales of cereal brands, such as Rice Krispies and Corn Flakes, made up 75% of Kellogg’s’ $7bn annual sales last year, but adding Keebler''s sales of $2.7bn reduces cereal’s share to under 50%.
Keebler’s senior management are known for their ability to revive drooping brands -– the company bought the Cheez-It brand in 1986 and sales have grown 86% to £270m each year.
The Keebler deal also puts Kellogg’s into more direct competition with rival Nabisco, currently being folded into Phillip Morris’ Kraft division.
To buy Keebler Kellogg’s also beat off competition from French rival Danone, which also bid for Nabisco last year.