Kraft Heinz Reportedly Close To Selling Planters To Hormel For $3 Billion - Forbes

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Topline

Kraft Heinz is nearing a deal to unload its Planters brand to Hormel for $3 billion, as Hormel continues to acquire firms to diversify its product portfolio

Key Facts

The Wall Street Journal reported Tuesday that the deal could be announced next week, pending completion of ongoing talks.

Planters is a 100-year-old brand, well known for its monocle-wearing Mr. Peanut logo

Hormel, whose core business has been chili and deli meat products, has been diversifying in recent years by acquiring such firms as Sadler’s Smokehouse (which specializes in pit-smoke meats) for $270 million in 2020; and Justin’s Nut Butters (maker of organic peanut butter) for $286 million in 2016.

The deal for Planters would rank as Hormel’s largest purchase to date, the Journal noted.

Meanwhile, Kraft Heinz, itself the result of a 2015 merger between two food giants, has been selling off some brands, including part of its cheese business last September to French dairy firm Lactalis for $3.2 billion, as it copes with changing customer tastes

Key Background

The Journal notes that, like its cheese business, Kraft Heinz’s nut business is highly commoditized – meaning the public thinks its products are identical to those made by a competing company, making price the primary determinant of sales. In recent years, Kraft Heinz has taken large impairment charges (i.e., reducing the recoverable value of some assets) with respect to various struggling brands, including Planters. In the second quarter of 2020, such charges totaled $2.9 billion. The Journal also speculated that many customers switched to niche brands perceived as being healthier.

Tangent

While Mr. Peanut has often appeared in Super Bowl commercials, Kraft Heinz said that the $5 million it would normally spend on game ads this year will instead be donated to people to reward them for their charitable acts.