FMCG
7 FMCG Giants Divesting Brands
There is significant change underway within large FMCG companies as they refocus and reshape their strategies to prioritise profitability. It seems inevitable that more large acquisitions and consolidations are on the horizon
Earlier this week, Mars revealed it was snapping up Pringles-maker Kellanova in the year’s biggest M&A activity. It is one of many major manufacturers that have sought to acquire new brands in the past few months. We round up recent FMCG mergers, acquisitions and portfolio reshuffles that are reshaping the grocery sector landscape.
Mars Acquires Kellanova
Earlier this week, Mars revealed it had reached an agreement to acquire Pringles maker Kellanova for more than $29 billion (£22 billion). This acquisition marks the largest-ever deal for Mars, surpassing its previous $23 billion agreement for Wrigley in 2008. This strategic move follows Mars’s recent purchase of upscale chocolate retailer Hotel Chocolat for £534 million last November.
The announcement regarding the potential acquisition of Kellanova, whose portfolio includes Pop-Tarts, Rice Krispie Treats, and Special K, was made earlier this month, sending Kellanova’s shares soaring by 18%. According to TD Cowen analyst Robert Moskow, this deal “could usher in another cycle of consolidation in the packaged foods space.”
Reckitt’s Brand Divestiture
In a bid to refocus on its ‘power brands’, Reckitt plans to offload its homecare and nutrition brands. This strategic decision aligns with Reckitt’s aim to concentrate on its high-growth and high-margin Powerbrands, such as Strepsils, Gaviscon, Nurofen, Lysol, Dettol, Finish, Vanish, Durex, and Veet. The company has revealed plans to sell essential home brands, including Air Wick, Calgon, and Cillit Bang, which generated a net revenue of £1.9 billion in 2023, by the end of 2025.
Additionally, Reckitt will find new owners for its nutritional arm, which includes infant formula brands like Mead Johnson, Enfamil, and Nutramigen; however, no specific timeline has been set for this transaction.
Reckitt has faced significant challenges in recent months, including a £7 billion drop in shares following a US judge’s ruling that the company must pay £47.1 million ($60 million) after a tragic incident involving its Enfamil Premature 24 infant formula. Moreover, the company suffered millions in damages due to a tornado that affected its Mount Vernon warehouse.
Diageo’s Portfolio Shake-Up
On July 19, Diageo agreed to sell Pampero rum to Italian spirits company Gruppo Montenegro, allowing the drinks giant to concentrate on its core portfolio areas. Just weeks prior, Diageo also confirmed the sale of fruit-flavored liqueur brand Safari to Portuguese beverage-alcohol company Casa Redondo.
Analysts were not surprised by the shake-up of Diageo’s portfolio, as the company had previously hinted at the potential sale of non-core spirit brands, including the yet-to-be-sold Pimms. This comes on the heels of a turbulent period for Diageo, which issued a profit warning in November amid rumors of a potential sale of its beer brands, with profits hitting a three-year low.
As major FMCG companies like Mars, Reckitt, and Diageo adjust their brand portfolios, the grocery sector continues to experience significant changes driven by strategic acquisitions and divestitures.
Pernod Ricard Sells Wine Units to Accolade Wines
Pernod Ricard has confirmed its decision to sell the bulk of its wine units to Australia’s Accolade Wines, as the alcohol giant aims to concentrate on its portfolio of spirit brands. This strategic move reflects Pernod Ricard’s intention to redirect resources toward driving growth in its remaining brands, enhancing its core offerings in the spirits sector.
The London-listed company, known for its diverse wine portfolio including Campo Viejo and Jacob’s Creek, plans to offload many of its wine brands sourced from New Zealand, Australia, and Spain. However, Pernod Ricard has clarified that it will retain ownership of its champagne brands, as well as some select wines from the United States, France, Argentina, and China.
This divestiture is part of a broader trend among major FMCG companies, such as Mars and Reckitt, which are restructuring their portfolios to focus on high-growth areas and streamline operations for greater efficiency in the competitive grocery landscape.
Carlsberg Merges with Britvic to Form Carlsberg Britvic
Carlsberg has reached an agreement to acquire Robinsons manufacturer Britvic in a £3.3 billion deal, leading to the creation of a single integrated beverage company in the UK known as Carlsberg Britvic. This merger signifies a strategic move for the Danish brewer, aiming to enhance its market presence in the beverage sector.
Additionally, Carlsberg will purchase its UK joint brewing venture with Marston’s for £206 million, acquiring a 40% stake. This successful acquisition follows Britvic’s rejection of two previous bids, including a £3.1 billion proposal.
Carlsberg group CEO Jacob Aarup-Andersen expressed optimism about the transaction, stating it is attractive for shareholders and supports the company’s growth ambitions, expecting to be earnings accretive and value-accretive by the third year. He also highlighted the potential for expanding their global partnership with PepsiCo, suggesting significant long-term benefits for both companies. The commitment to enhance commercial and supply chain investments in Britvic is aimed at making Carlsberg Britvic the preferred multi-beverage supplier in the UK.
Chapel Down Considers Sale Amid Growth Plans
Chapel Down, the UK’s largest winemaker, is contemplating the sale of the company as part of a strategic review focused on securing funding for its growth plans. The decision has arisen from a need for long-term investment to support the development of new vineyards and the construction of a purpose-built winery expected to be operational by 2026.
The winemaker has announced that it is exploring various options, including a potential sale of the business or securing funding from new or existing shareholders. Despite the uncertainty, Chapel Down’s board noted that it remains on track to achieve double-digit sales growth in 2024. While potential buyers have not been publicly identified, recent speculation involving Australian firm Treasury Wine was dismissed.
Unilever’s Ice Cream Division Split Plans
Earlier this year, Unilever revealed its intentions to split its ice cream division from the rest of its portfolio in an effort to create a “leaner and more accountable” business model. However, analysts have since indicated that Unilever is facing challenges in offloading its entire multi-billion pound ice cream division, which includes well-known brands like Magnum, Ben & Jerry’s, and Wall’s, collectively valued at over £15 billion.
To navigate these challenges, it is believed that Unilever may consider retaining a significant minority stake in the division. Nonetheless, industry experts suggest that potential buyers might need to collaborate to formulate competitive bids for these iconic brands. This ongoing restructuring highlights the complexities FMCG giants face as they adapt to market demands and optimize their portfolios.