Why Kraft Heinz Sold Planters Peanuts

Kraft Heinz has agreed to sell its nuts business, which includes most Planters and Corn Nuts products, to Hormel Foods, the Minnesota-based maker of Spam and Skippy peanut butter, for $3.35 billion in cash. Both parties expect the deal to close in the first half of 2021. “This is another momentous step in our rapid transformation of Kraft Heinz,” Miguel Patricio, CEO of Kraft Heinz, said in a statement. In recent years, Kraft Heinz has been shedding brands from its portfolio to focus on its biggest names. Last September, for example, the company sold some of its cheese business, including Breakstone’s and Cracker Barrel, to the French dairy company Lactalis for $3.2 billion. Planters generated a great deal of buzz during last year's Super Bowl when, in a campaign concocted by VaynerMedia, Mr. Peanut drove his Nutmobile off a cliff and died. (Spoiler: He came back to life as Baby Nut.) Although the brand decided to sit out this year’s Big Game, it’s currently running another marketing effort that involves giving away the $5 million it would have paid CBS to secure a 30-second spot during Super Bowl 55 to everyday people doing small acts of kindness in their community. Despite these endeavors, demand for Planters, which Kraft Heinz acquired in 2000, has been waning in recent years. Planters generated $1.38 billion in 2015, according to sales numbers from NielsenIQ. Revenue has declined every year since, with the exception of 2020, when the snack brand saw a slight uptick. “Planters is one of the brands most affected by private label in our portfolio,” Patricio said during a call with analysts on Feb. 11. Similar to other packaged-food companies, both Kraft Heinz and Hormel Foods have seen sales grow as more people eat at home during the pandemic. Kraft Heinz recently reported net sales increased to $26.2 billion in 2020, up 5% compared to the previous year. Its nuts business contributed $1.1 billion to that total. Expanding the Planters brand Sales aside, Planters has also experienced a slight decrease in favorability. In April 2017, 79% of U.S. adults held either a somewhat or very favorable view of Planters peanuts, according to data intelligence firm Morning Consult. This week, that number is at 68%, with older Americans being much more likely to have a positive impression of the brand than younger shoppers. That said, in terms of public perception, Planters hasn’t suffered more than its major rivals. “While favorability toward individual snack brands can increase and decrease at different times due to a mix of advertising pushes and other brand activities, total favorability toward Planters has generally remained on par with that of other brands in the category," said Victoria Sakal, managing director of brand intelligence at Morning Consult. At Hormel, the company plans to do with Planters what it did with Skippy, which it acquired in 2013. That means spending more money on marketing and innovation, along with increased focus on brand building and ecommerce, said Jim Sheehan, evp and CFO of Hormel. “Snacking couldn’t be more on-trend, and the Planters and Corn Nuts brands will be a game changer within our already sizeable snacking portfolio,” said Sheehan, noting that Skippy has been one of Hormel’s most successful acquisitions. Jennifer Bartashus, senior consumer staples analyst at Bloomberg Intelligence, thinks the deal makes sense for all parties. For Hormel, which also owns the Justin's line of nut butters and snacks, the addition of Planters could lead to innovation and cost savings. For Kraft Heinz, the divestiture, along with the sale of its cheese segment, will reduce the company’s exposure to private label brands. As Bartashus put it: “This transaction is one that we expect will benefit both companies.”