Initial Comments by Emily Balsamo - Research Analyst
B&G Foods signed a deal on Thursday to acquire Green Giant and canned vegetable brand Le Sueur from General Mills for $765 million in cash. Prior to the acquisition, B&G did not own any brands of frozen foods, with Green Giant marking the company’s foray into the freezer aisle. Green Giant, which produces frozen vegetables, hummus and, vegetable side dishes, has seen declining sales in previous years. General Mills explained the sale of the company in terms of their vision for their portfolio, focusing on fast moving, less commoditized products such as cereals, yoghurt, and snacks.
General Mills said the sale was in line with its effort to reshape its portfolio to focus on brands, categories and geographic markets that have the greatest future growth opportunities. General Mills posted sales of $18.7 billion in fiscal year 2015. – New York Times
The two companies have struck a deal allowing General Mills to continue to operate Green Giant under license in Europe and some other export markets. In a news release announcing the acquisition, Robert C. Cantwell, the B&G Foods president and chief executive, hinted at the future of Green Giant:
“For over 100 years, Green Giant and Le Sueur have been providing consumers with great tasting, nutritious vegetables picked at the peak of perfection. We look forward to building on that rich history by offering new and innovative products that will respond to the needs of today’s health conscious consumer.” -B&G Foods
An eye towards innovation may be what Green Giant needs to rebound sales. The transaction is targeted to close by the year’s end.
Further Comments by Pinar Hosafci - Packaged Food Analyst
Added 9/4/15 10:00am CST
The disposal of Green Giant has been a long time coming. Speculations around the sale of Green Giant have already surfaced in March 2015, following General Mills announcement to trim its number of divisions from seven to five. Under this new restructuring plan, frozen food, which accounts for the majority of Green Giant revenue, was integrated into other divisions. 2014 was one the worst year’s in General Mills recent history with net sales growing by less than 1% - their slowest pace since 2010. This has to a large extent to do with General Mills strong reliance on slow growing staple foods such as cereals and processed vegetables. As General Mills controls a wide range of brands in diverse categories, it faces challenges in achieving group synergies. While Green Giant is General Mills’ second largest brand following Yoplait, it has few potential synergies with the group’s core focus areas, which include yoghurt, cereals and snacks. The importance of Green Giant in General Mills’ overall portfolio has also been eroding: While in 2009 Green Giant accounted for 12% of General Mill’s packaged food sales, in 2014 the brand’s share fell to 8%. The US canned processed vegetable business accounted for the majority of this share decline, with sales crashing by over US$50 million over the course of the last five years. As a result, the company has taken a more active approach in streamlining its portfolio towards premium, higher margin products and divesting away from low growth, low profit brands such as Green Giant. This strategy to focus on high margin brands was also illustrated by the group’s recent acquisition of Annie’s Naturals, a manufacturer of premium frozen and ambient snacks. The sale of Green Giant, General Mill’s second biggest cash generator, could free up resources help the company make more acquisitions in the premium healthy food area and accelerate growth in emerging markets, in particular in China, where the group recently opened a research and development centre, the first major one outside the US.
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