Ferrero will buy Kellogg's Keebler cookies, Famous Amos, Mother's, Murray's, Girl Scout cookies and fruit snacks brands for $ 1.3 billion. Ferrero makes Nutella, Tic Tacs and Ferrero Rocher chocolates including pastry shops.
Last year, the business Kellogg sells to Ferrero brought in about $ 900 million in revenue but only $ 75 million in operating profit.
"Disposal of these great brands was not an easy decision," said Steve Cahillane, Kellogg's CEO in a statement. "This disposal is yet another action we have taken to reshape and focus our portfolio, which will lead to reduced complexity, more targeted investment and better growth."
Wells Fargo analyst John Baumgartner said the sale could provide a "halo effect" for Kellogg's, which holds onto Keebler's cracker business, if Ferrero invests in marketing Keebler.
For Ferrero, the acquisition is a way to expand its North American business. The agreement "[allows]] gives us a significant diversification of the portfolio and capitalizes exciting new growth opportunities in the world's largest cookies market," said Lapo Civiletti, CEO of the Ferrero Group.
Christopher Hood, president of Kellogg North America, compared Kellogg's cookie business to Pringles, which the company bought from Procter & Gamble in 2012. Pringles "was not a high-growth business in P&G, not a business that the company was interested in. In investing in, because they had alternative places where they could invest too high return, "he said." There is a similar situation for us within Kellogg's. "
Saltier snacks like Pringles have been a boost for Kellogg's business. In February, the company said Pringles retail sales grew by 7% and Cheez-Its grew 5% in 2018, referring to Nielsen's data.
Sweetener snacks also did well last year. Retail with Rice Krispies Treats grew 15% and Pop-Tarts canvas up 2% in 2018. Cahillane has spoken all of these among Kellogg's "power brands."
And even though grain sales are spotty, they are Kellogg's bread and butter, so the brand must find a way to make them grow.
While Kellogg sells its low-priority businesses and focuses on power companies, it also brings trendy new brands into the board. The company announced the acquisition of RXBar, the protein bar brand that has expanded into nut butters and child treats, in 2017.
In November, Kellogg said it plans to reorganize its North America team and invest in e-commerce to drive growth.