A theme that permeates our 2018 industry-specific supply chain predictions is one of managing far more accelerated industry change which will continue to occupy the attention of senior supply chain, line-of-business, procurement executives and associated management teams in 2018 and beyond.
An example of such dynamics occurred this week in the consumer goods industry as two noted consumer branded companies each initiated new acquisition moves to accelerate long-term growth in healthy packaged snacks market segments.
Campbell Soup Company announced its intent to acquire snacks company Snyder’s-Lance for an estimated all-cash price of $4.9 billion, the largest acquisition in Campbell’s 148-year history. The latter includes the offering of Diamond Foods, Kettle, Lance, Pop Secret Snyder, Tom’s, and Cape-Cod branded snacks.
The deal is the latest in a series of industry acquisitions among various traditional consumer product branded companies to provide attractive product choices in growing market segments. Market analysis firm IRI estimates that the broad U.S. snacks market is forecasted to be $89 billion in sales and is growing at a compound rate of nearly three percent.
According to a company release, with this acquisition, Campbell’s baked snacks segments has the potential to grow from an existing 31 percent of total revenues, to an estimated 46 percent of revenues. Campbell’s soup portfolio including recently acquired Pacific Food would represent approximately 27 percent of annual net sales, thus providing a reshaping of product growth segments. The industry witnessed a similar strategic product shifting with the spin-off of Mondelez International from traditional packaged and dairy foods producer Kraft in 2012.
Further announced this week was a deal by The Hershey Company to acquire Amplify Snack Brands, producers of the Skinny Pop brand of healthy snacks for a reported $921 million.
Other deals announced in 2017 include Conagra’s acquisition of Angie’s Artisan Treats and Kellogg’s acquisition of Chicago Bar Company.
For the associated supply chains of these companies, the implication of merger and consolidation add both opportunities and added challenges.
In the opportunities column, smaller healthy snacks businesses have developed expertise in the sourcing of natural food focused farmers and suppliers while logistics teams have honed effective distribution of healthy snacks to convenience and other local retail outlets. The ability to leverage new suppliers and wholesale distributors of more healthy and sustainable food sources adds opportunities as-well. In the challenge category, there are the usual redundant resources, staff and technology applications that will need to be evaluated as will be opportunities to leverage procurement and operations scale.
In the case of Campbell, there is an expectation of $170 million in cost synergy opportunities over the next five years, as well as completing Snyder’s-Lance existing cost transformation program. In the case of Hershey and Amplify, $20 million in cost synergy opportunities have been communicated. If history serves as an indicator, Mondelez’s aggressive cost synergy targets consumed its supply chain team efforts for multiple years and now that company is about to undergo a new CEO leadership change.
Thus, the overall supply chain management agenda becomes locked-in with managing consolidation and transformation while delivering committed cost and productivity savings. That can leave precious time to work on added market, process, innovation, and supply chain resiliency needs.
These are the dimensions of today’s consumer products supply chains, responding to many forms of business change. The leaders and innovators will be those that embrace change as a catalyst for new thinking and bolder innovation.
Bob Ferrari
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