Mars builds snacking battalion as consumers challenge the status quo
I’ve always thought that one thing a global food company with 15-billion-dollar brands (as well as all the other clearly poor performing brands) needs is another couple of billion-dollar brands. While Mars scratched that itch by acquiring Kellanova for US$36 billion last week, what else was at play?
Mars started out in the 1880s. Since then, it hasn’t done too badly at all. Now worth $126 billion, the family-owned company has three divisions, with our insatiable appetite to anthropomorphise our pets seeing its Petcare business have 10 of those billion-dollar brands and account for 59 per cent of net sales in FY23.
Mars Snacking accounted for 38 per cent of the company’s net sales in FY23 and Mars Food & Nutrition making up three per cent of net sales. Snacking has 53 factories around the world, is in 180 countries and employs roughly 34,000 people.
The deal means it will have capacity to double in Snacking business in the next ten years. It will own Kellanova’s brands, assets, and operations, including its snacking brands, portfolio of international cereal and noodles, North American plant-based foods and frozen breakfast are included in the transaction.
It will also add two US$1 billion brands to the business in Pringles and Cheez-It and expand Mars’ health and wellness Snacking portfolio.
Nice.
What Mars has nailed in chocolate snacking, Kellanova has done similarly with the salty end of the market, so that’s a nice move in evening out its portfolio.
But there’s movement at the snacking station, something the Mars CEO, Poul Weihrauch, alluded to when he said the acquisition would enable Mars to develop a sustainable snacking business that is “fit for the future”.
“We will honour the heritage and innovation behind Kellanova’s incredible snacking and food brands while combining our respective strengths to deliver more choice and innovation to consumers and customers,” Weihrauch said.
The global president of Mars Snacking, Andrew Clarke, said, “Our complementary portfolios, routes-to-market and R&D capabilities will unleash enhanced consumer-centric innovation to shape the future of responsible snacking.”
Mars said it intends to, “apply its proven brand-building approach to further nurture and grow Kellanova’s brands, including accelerating innovation to meet evolving consumer tastes and preferences, investing locally to expand reach and introducing more better-for-you nutrition options to meet evolving consumer needs”.
Health and wellness trends have always been there, it’s just now more people are acting on them rather than just saying they are. Covid played a big part in that, as did the world being on fire or under water.
But then another catalyst swanned it, and while it’s true impact is yet to show, the actions of the big end of town reveal they know it’s coming.
GLP-1 (glucagon-like peptide 1) have been around for more than a decade to treat diabetes. But more recent versions including Ozempic, Wegovy, and Mounjaro have proven highly effective in treating obesity as well.
While the research shows GLP-1 drugs can reduce body weight by 10-20 per cent, they can also reduce consumption volume by up to 50 per cent, and a drop in eating processed foods and snacks.
The anecdotal reports from those taking the drug also show a reduction in alcohol consumption, drug and tobacco use, and other addictive behaviours.
This isn’t going to be some cataclysmic change in the supermarket aisles just yet – true market penetration can take decades. Less than one per cent of the US population is currently on GLP-1 drugs but Morgan Stanley Research analysts estimate that 24 million people, 7 per cent of the US population, will be taking a GLP-1 drug by 2035.
Morgan Stanley Tobacco and Packaged Food analyst, Pamela Kaufman, said analysts are forecasting a drop in consumption of as much as 3 per cent through 2035.
“Two-thirds of patients reported eating three or more snacks per day before starting the drugs, while 74 per cent reported eating two snacks or less after starting the drugs,” Kaufman said.
But demand will grow for “weight-loss management foods” like protein shakes and bars as consumers look to substitute something healthier into their snacking.
And companies are already responding to this. In May, Nestlé launched Vital Pursuit, a new line specifically intended to be a “companion” for GLP-1 weight loss and people trying to lose weight.
The company said, “The products are high in protein, a good source of fibre, contain essential nutrients, and they are portion-aligned to a weight loss medication user’s appetite.”
Last year, in the US, Mars acquired Kevin’s Natural Foods, which makes chef-inspired sous-vide meals, sides, and sauces using whole foods and simple ingredients. While in 2020 it bought two better-for-you brands, Kind and Nature’s Bakery.
Whatever way the wind blows with consumer behaviour, one thing is certain, Mars has quite the market presence to adjust to it.
