Supply Chain Matters would venture a guess that many of our readers are under the impression that privately held Mars, Inc, the producer of delicious M&M chocolates and Snickers candy bars was primarily a candy and snacks provider.
Mars Pet Care Division which includes brands such as Pedigree and Whiskas is, according to the Wall Street Journal, this company’s largest and fastest-growing division.
Thus, yesterday’s announcement that Procter & Gamble is selling the bulk of its pet food business, with brands such as Eukanuba, Iams and Natura, to Mars is a rather significant development. The value of the deal is estimated to be $2.9 billion, but it does not include distribution of brands in the European Union. The transaction is expected to close in the second half of 2014.
Reuters and other business media reports have indicated that P&G’s current multi-year restructuring program called for the exit of low-growth brands such as the P&G pet food portfolio. P&G CEO A.G. Lafley is quoted that the exit from pet food was “an important step” toward focusing on core businesses.
For Mars, this may well be the opportunity to leverage the company’s supply chain and channel distribution capabilities in the pet food market segment. Both the WSJ and Reuters cite data from Euromonitor, indicating that Mars currently has a 23.4 percent market share in the pet food segment, just slightly higher than Nestle. With the completion of this deal, Mars will have access to specialty pet food retailers as well as club stores and mass retailers. which features the Friskies and Purina pet food brands with a 23.1 market share?
With the addition of P&G’s pet food brands, it will be interesting to observe how both Mars and Nestle supply chain ecosystems respond to a new heightened competition and a changing industry dynamic.