Ohio-based Smucker announced Oct. 17 it will sell the Bick’s brand plus the Habitant pickled beets, Woodman’s horseradish and McLarens pickled onions brands to Illinois private-label food firm TreeHouse for about $20 million cash (all figures US$).

TreeHouse CEO Steve Oakland said the deal will boost its depth in “our growing pickles category, allowing us to expand into Canada and thus positioning TreeHouse for continued success.”

TreeHouse, which operates five plants in other food categories in Canada, has had a co-packing arrangement with Bick’s “for many years and we are pleased to integrate this business with our manufacturing network,” Oakland said.

Smucker said the brands in the deal generated total net sales of about $60 million in its fiscal year ended last April 30.

The Bick’s brand’s history in Canada dates back to the 1940s, when Toronto-area cucumber growers George and Walter Bick began making dill pickles. The Bick’s company was sold to Robin Hood Canada in 1966 and came to Smucker in 2004 through its deal for Robin Hood’s parent, International Multifoods.

Despite the brand’s Canadian roots, Bick’s products haven’t been made in Canada since 2011, when Smucker moved to shut the Bick’s facilities in southern Ontario and shift their work to a Smucker plant in Wisconsin and other “third-party” sites.

Tim Wayne, general manager for Smucker’s Canadian and international business, said Oct. 17 the sale would allow the company to focus on “growing our position” in the coffee, spreads, frozen handheld and pet categories in Canada. Smucker brands in Canada in those categories include Folgers, Smucker’s, Jif, Meow Mix and Milk-Bone.

The sale would also be “supporting continued leadership in the baking category” in Canada, where its brands include Robin Hood, Five Roses, Carnation and Eagle Brand.

Smucker, in its release, said it plans to close the deal in the third quarter of its current fiscal year.

On the acquisition side, Smucker in September announced a $5.6 billion bid for Hostess Brands, the maker of snack cakes such as Twinkies and HoHos and the Voortman cookie brand. That deal includes several U.S. manufacturing plants plus one at Burlington, Ont. — Glacier FarmMedia Network

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The deal was worth about $4.6 billion excluding debt, with Jif peanut butter maker Smucker paying Hostess shareholders $34.25 per share (all figures US$). The cash-and-stock offer represents a premium of 54 per cent on the stock since the day Reuters reported the company was exploring a sale.

Hostess shares have surged 27 per cent since the report about the sale process and were up 19 per cent at $33.49 in early trading on Monday, while Smucker’s shares were down seven per cent as investors viewed the deal as too expensive.

Smucker said the deal, which is expected to close in the third quarter of its current fiscal year, represents adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of about 17.2 times based on its estimate of Hostess Brands’ 2023 results.

Campbell Soup’s recent acquisition of Rao’s sauce maker Sovos Brands represented an adjusted EBITDA multiple of 14.6 times, including run rate savings, and 19.8 times excluding those. The food and tobacco sector currently trades at a 14.4 projected 12-month EBITDA on average, LSEG data shows.

“We can’t say we love this transaction from SJM’s (Smucker’s) perspective. First, the price is high; we are very surprised that SJM (or anyone) is paying this amount,” JPMorgan analysts said in a note on Monday.

Smucker’s bet on Hostess comes as major U.S. packaged food companies look to expand their brand portfolios with pandemic-era fortunes dwindling.

In recent months, the U.S. packaged food industry has seen an uptick in mergers as most of the companies seek to improve volumes by rebranding portfolios after benefits from price hikes started wavering.

Culmination of turnaround

Hostess Brands became an acquisition target after its price hikes boosted revenue but fueled investor concerns over its prospects with its volume growth consistently declining.

The tie-up between Smucker and Hostess follows a spate of other deals in the sector, including Campbell’s $2.7 billion deal for Sovos and Unilever’s purchase of premium frozen yogurt brand Yasso in North America.

Based in Lenexa, Kansas, Hostess was founded in 1930 and is behind several iconic household brands, including Ho-Hos, Ding Dongs, Zingers, and Voortman cookies and wafers.

The deal with Smucker represents a major turnaround for Hostess, which has filed for bankruptcy twice, in 2004 and 2012, due to a combination of private equity owners saddling it with debt and failing to come up with new snacks that appealed to consumers.

Entrepreneur Dean Metropoulos and private equity firm Apollo Global Management returned Hostess to the stock market in 2016 through a deal with a special purpose acquisition company backed by the private equity firm founded by Alec Gores.

By the end of 2020, Hostess had revamped its portfolio and was generating revenue of over $1 billion, an important landmark in its turnaround efforts. It has managed to keep its revenue growing, sometimes by raising prices as sales volumes weakened.

Smucker, which also houses coffee and pet food brands, has a market valuation of over $14 billion and had raised prices of its jams and jellies, which helped boost its profit forecast for the year.

— Reporting for Reuters by Ananya Mariam Rajesh in Bangalore and Anirban Sen and Abigail Summerville in New York; additional reporting by Dimpal Gulwani in Bangalore.

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New Jersey-based B+G Foods announced Monday it will buy the Crisco product lines from Ohio-based J.M. Smucker for about US$550 million (C$725.1 million).

The sale includes the soybean- and palm-oil-based Crisco shortening product lines, as well as Crisco canola-based and soybean-based cooking oils, plus the brand’s Cincinnati manufacturing plant and warehouse, which employ about 160 people.

The deal also includes Smucker’s oils and shortening business outside the U.S., which is “primarily in Canada,” the company said.

The Crisco business booked net sales of about US$270 million for Smucker in its fiscal year ended April 30. The company expects to close the deal in its third quarter of fiscal 2021.

Smucker has owned the Crisco brand since 2001, when it bought that product line and Jif peanut butter from Procter + Gamble.

“Crisco is an iconic brand that is beloved by consumers, and the business has been a solid contributor to our financial performance,” Smucker CEO Mark Smucker said Monday in a release.

“However, our strategic priorities include an increased focus and allocation of resources toward pet food and pet snacks, coffee, and snacking to maintain momentum in these categories.”

B+G CEO Kenneth Romanzi said the company is getting “the number one brand of shortening, the number one brand of vegetable oil and… a leadership position in other cooking oils and cooking sprays.”

Crisco, he said, “has a strong heritage, as the original all-vegetable shortening that transformed the way people bake and cook over 100 years ago.”

B+G said it projects that in 2021, the Crisco business will “continue to benefit from increased demand due to the COVID-19 pandemic” and again generate annual net sales of about US$270 million. — Glacier FarmMedia Network

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Chicago-based Conagra Brands said Tuesday it will sell its Wesson oil brand and related assets — including a 280,000-square foot U.S. processing plant at Memphis — to Richardson for an undisclosed sum.

Wesson-branded retail cooking oils, available in the U.S. for over 100 years, today include canola oil, corn oil, soy oil and “Best Blend,” a blended canola/soybean oil. Conagra has owned the brand since 1990, when it took over the Beatrice Co. product portfolio.

Richardson is already a known entity in Canadian and U.S. canola oil retail markets, where it sells the Canola Harvest oil and Crystal and Mirage margarine brands.

The Winnipeg company’s canola processing operations already include crush plants at Lethbridge, Alta. and Yorkton, Sask. and packaging plants at Lethbridge and at Oakville, Ont.

Conagra, whose brand stable includes Pam, Fleischmann’s, Duncan Hines, Reddi-wip, Slim Jim, Aunt Jemima, Chef Boyardee, Jiffy Pop and Orville Redenbacher’s among others, has sought to shed some of its business lines in recent years and become a “singularly focused, consumer branded food company.”

To that end, Conagra in 2016 spun off its Lamb Weston potato processing business and last year set up a deal to sell the Wesson brand to Ohio-based jam maker J.M. Smucker Co. for about US$285 million (C$384.6 million).

But the U.S. Federal Trade Commission challenged the Smucker deal in March this year, saying Smucker, owner of the Crisco brand, would have controlled at least 70 per cent of the market for branded canola and vegetable oils if it took over Wesson.

Asked via email Tuesday how the value of its acquisition compares to the aborted Smucker deal, a representative for privately-held Richardson reiterated the company won’t comment regarding the purchase price.

Conagra said its deal with Richardson, subject to the usual closing conditions and any required regulatory approvals, is expected to close by the end of the first calendar quarter of 2019.

Of the Wesson plant at Memphis, Richardson CEO Curt Vossen said in a release that the company is “excited about expanding into this geography and look(s) forward to investing in the future of this plant, the employees and the community.”

Richardson described the Wesson brand as “a preferred choice in American homes for cooking and baking applications for more than a century,” noting its marketing campaigns “firmly established the brand as a common household name for the health-conscious and discerning consumer.”

That said, Richardson added it plans to “reinvigorate the brand to engage customers.”

“The rich history of both our company and the Wesson brand makes this an exciting acquisition for us,” Vossen said. “We believe that consumers will continue to seek out high-quality foods and aligning with the Wesson brand expands our ability to meet that consumer desire.” — Glacier FarmMedia Network

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The unit could fetch as much as US$700 million (C$902.4 million), Bloomberg reported, citing one of the sources.

A final decision to pursue a sale has not been made and Smucker may keep the unit, sources told Bloomberg.

Smucker acquired the Robin Hood and Pillsbury brands as part of its deal to buy International Multifoods in 2004.

Smucker’s Canadian arm sells Robin Hood flour and baking products in the retail and grocery market, with flour milled by Ardent Mills under a co-packing agreement.

Denver-based Ardent, which has Canadian facilities at Montreal, Saskatoon, Mississauga and Brampton, Ont., also uses the Robin Hood brand under license from Smucker to sell flour in Canadian foodservice and industrial markets.

Ardent’s Canadian grain-based foodservice and industrial business had been owned by Smucker’s Canadian arm until 2006 when it sold that operation to one of Ardent’s heritage companies, Horizon Milling.

The Robin Hood brand took a hit last spring when it was caught up in a major E. coli-related product recall linked to flours and flour products made at Ardent. In Canada, 30 people were sickened in the related E. coli 0121 outbreak.

Smucker’s baking brands segment contributed to a decline in net sales in its U.S. retail consumer foods business in the third quarter, the company said in February.

Smucker said Tuesday it would abandon its plan to acquire Conagra Brands’ Wesson Oil brand after the U.S. Federal Trade Commission had moved to block the deal arguing it would likely lessen competition and violate anti-trust law.

J.M. Smucker did not respond to a request for comment outside business hours.

— Reporting for Reuters by Vibhuti Sharma in Bangalore. Includes files from AGCanada.com Network staff.

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Mark Smucker, CEO of J.M. Smucker, said “it is not in the best interest of either party to expend the anticipated significant additional time and resources to challenge the FTC’s administrative complaint.”

He said the companies “underestimated the significant role that private label brands play in the oils category, which account for approximately 50 percent of all cooking oil sales and hold significantly higher market share at some retailers.”

Conagra said in a statement it was disappointed by the FTC’s decision and would continue “its evaluation of the role of the Wesson oil business within its portfolio.”

“We have determined that it is in the best interest of our shareholders, customers and employees to terminate the agreement to sell the Wesson oil business to the J.M. Smucker Company rather than pursue litigation,” Conagra said.

Smucker owns the Crisco brand. If it acquired the Wesson brand, it would have controlled at least 70 per cent of the market for branded canola and vegetable oils sold to grocery stores and other retailers, the FTC said in a statement.

The FTC said the deal was “likely to increase Smucker’s negotiating leverage against retailers, especially traditional grocers, by eliminating the vigorous head-to-head competition that exists between the Crisco and Wesson brands today.”

Conagra announced plans to sell the Wesson brand for about US$285 million in May 2017.

Conagra, the maker of Chef Boyardee pasta and Orville Redenbacher’s popcorn, sold its loss-making private-label business in 2016 to TreeHouse Foods and spun off its Lamb Weston frozen potato business.

J.M. Smucker had said it expected the deal to add about US$230 million to its annual net sales.

The FTC said retailers and ultimately consumers “would likely face higher prices for branded canola and vegetable cooking oil” if the deal was approved.

The FTC said the deal was struck after attempted price increases by each brand over the past two years that were limited by intense competition from the two rivals.

The FTC said Smucker’s internal documents acknowledged that eliminating price competition between Crisco and Wesson was a central part of its rationale for the acquisition.

— Reporting for Reuters by David Shepardson.

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Hershey, Mondelez International, J.M. Smucker and Campbell Soup said higher transportation costs hurt profits during the quarter, preventing them from taking advantage of lower commodity prices.

An increase in truck rates over the next 12 months implies a 15-18 basis point gross margin headwind for U.S. food companies on average, Bernstein analyst Alexia Howard said in a note last week.

Recruiting and retaining truck drivers has been a lingering problem for U.S. trucking companies as they compete for qualified ones at a time of low unemployment, while striving to keep pay, a huge expense, as low as possible.

Fuel costs are rising too. Diesel prices were 37 cents per gallon higher in September-December 2017 than a year ago (all figures US$). The average diesel fuel price per gallon for most of January was up 44 cents from last year.

Structural labour shortages and higher fuel costs would drive truck rates up five to six per cent in the next year, Howard said.

Freight typically accounts for about five per cent of costs of goods sold, or roughly three per cent of sales on average for food manufacturing companies.

“Looking across the entire food value chain, the margin headwind could be as high as 50-70 basis points for the entire industry,” Howard said.

Chocolate maker Hershey reported a 1.8 per cent fall in adjusted margins, partly hit by freight costs. Oreo maker Mondelez said margins in the quarter were flat compared with last year with cost of sales rising nearly three per cent.

This comes despite prices of key ingredient cocoa falling to a five-month low in December.

Jif peanut butter maker J.M. Smucker and soup maker Campbell warned in November that freight and truck-related issues would hit margins. The companies are yet to report results for the last quarter of the year.

“Demand for overall transportation is exceeding supply in marketplace and this makes a tough situation more difficult,” said Mark Pogharian, Hershey’s vice-president for investor relations.

He added that shippers would have limited flexibility to move shipments based on truck availability and may cause overall market rates to increase further.

— Reporting for Reuters by Sangameswaran S; additional reporting by Siddharth Cavale in Bangalore.

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Conagra will continue to manufacture products sold under the Wesson brand for up to one year following the close, after which Wesson will be merged into J.M. Smucker’s oils manufacturing facility in Cincinnati.

The Wesson brand, whose product offerings include vegetable, canola, corn and blended oils, would bolster Smucker’s own Crisco oil brand, J.M. Smucker CEO Mark Smucker said in a statement.

The deal marks another step by Chicago-based Conagra, which has been divesting many of its private label and condiment businesses to become a branded foods-only company.

Conagra last year sold its loss-making private-label business to TreeHouse Foods and spun off its Lamb Weston frozen potato business.

The maker of Chef Boyardee pasta and Orville Redenbacher’s popcorn also said in December that the company will be 91 per cent branded after it spun off its Lamb Weston unit.

Conagra reported a better-than-expected third-quarter profit in March, as it discontinued sales of lower-margin products and cut back on discounts.

J.M. Smucker said it expects the deal to add about US$230 million to its annual net sales. Annual cost synergies are estimated to be US$20 million within two years of the deal’s close.

J M. Smucker, which also sells Jif peanut butter, expects the deal to add about US10 cents per share to its adjusted earnings in the first full-year after close.

The transaction is subject to customary closing conditions, including regulatory approvals.

Shares of Conagra were down 1.3 per cent at $38.53 in early afternoon trading on Tuesday, while J.M. Smucker was down marginally at $127.92.

— Reporting for Reuters by Nikhil Subba and Gayathree Ganesan in Bangalore.

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The Canadian Food Inspection Agency (CFIA) on Tuesday issued a food recall warning for Robin Hood All-Purpose Flour, Original, distributed in British Columbia, Alberta, Saskatchewan, and Manitoba.

The flour in question was sold in 10-kilogram bags with the UPC code 0 59000 01652 8 plus a code containing BB/MA 2018 AL 17 — referring to the product’s best before date of April 17, 2018 — and lot code 6 291 548, CFIA said.

Recalled products “should be thrown out or returned to the store where they were purchased,” CFIA said, noting food contaminated with E. coli “may not look or smell spoiled but can still make you sick.”

Any recalled product should be secured in a plastic bag and thrown out or returned to the store where it was purchased for a refund, the Public Health Agency of Canada said in a separate release Tuesday.

Restaurants and retailers were also advised not to sell or serve the recalled product, nor any items that may have been prepared or produced using the recalled product.

During a food safety investigation, PHAC said, samples of Robin Hood flour were collected and “did test positive” for E. coli O121. Several individuals who became ill reported having contact with Robin Hood flour, the agency said.

PHAC on Tuesday reported 25 cases of E. coli O121 with a matching genetic fingerprint so far in its investigation, including 12 in British Columbia, four each in Saskatchewan and Alberta and five in Newfoundland and Labrador, with illness onset dates from November 2016 to late February this year.

Of the flour batch in question, though, CFIA said in its recall notice Tuesday there had been “one reported illness associated with the consumption of this product.”

Of the 25 cases, six people were hospitalized, and all the cases “have recovered or are recovering” with no deaths reported, PHAC said.

“This outbreak is a reminder that it is not safe to taste or eat raw dough or batter, regardless of the type of flour used as raw flour can be contaminated with harmful bacteria such as E. coli,” PHAC said.

While a cause for the contamination wasn’t stated, Smucker Foods of Canada, which owns the Robin Hood brand, has said in an unrelated statement on a company website that it’s “important to remember that wheat is grown outdoors where bacteria are often present,” thus consumers should never eat uncooked dough or batter made with raw flour.

It’s still possible, PHAC said Tuesday, that “additional products linked to the outbreak investigation may be identified.” — AGCanada.com Network

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