Dive Brief:

• Candy and gum giant Mars agreed to purchase snacks manufacturer Kellanova for $35.9 billion, a deal that marks the largest in the food and beverage space in several years since the $45 billion merger of Kraft Heinz in 2015.
• Under the transaction, Kellanova — the maker of Cheez-It, Pringles, Pop-Tarts and Eggo, among other brands — would become a part of Mars Snacking, joining the portfolio of brands that includes M&M’s, Kind bars and Extra gum. It will be led by the privately-held candy giant’s global president of snacking Andrew Clarke at its headquarters in Chicago.
• The purchase is projected to close in the first half of 2025, the companies said in a statement.

Dive Insight:

Less than a year after Kellanova became a standalone company following its split with Kellogg’s North American cereal unit, the multi-billion snacks company's days as a solo entity appear to be numbered.

While Mars, with more than $45 billion in annual revenue, is best known for its candy and gum, its presence in the packaged food space extends into rice with Ben’s Original and ready-to-eat Indian-based meals from Tasty Bite. It also has a dominant position in pet care, with veterinary chain VCA, PrettyLitter, Royal Canin and Pedigree.

The fact that Mars is purchasing another snacking company in Kellanova is hardly surprising considering how active it’s been on the M&A front in recent years to diversify its business.

It purchased the rest of Kind in 2020, valuing the better-for-you bar company at about $5 billion. That same year, Mars purchased snack bar maker Nature’s Bakery. And in 2023, Mars added Kevin’s Natural Foods, a high-growth maker of chef-inspired sous-vide meals, sides and sauces using whole foods and simple ingredients.

In buying Kellanova, Mars would add a portfolio loaded with popular snacking brands and a well-known plant-based food offering in MorningStar Farms. Mars would effectively own the day when consumers could turn to one of its products, from breakfast in the morning in Eggo and Pop-Tarts, snacks during the day or evening with gum, bars, candy and chips, and meals in the evening with MorningStar, Ben’s Original, Tasty Bite and Kevin’s.

”There is significant logic behind Mars acquiring Kellanova, not least because the deal would allow Mars to push more heavily into the savory snacks category where it has virtually no presence,” Neil Saunders, managing director of GlobalData, said in a statement before the deal was announced. “Savory snacks sales are growing at a faster clip than confectionery, where Mars currently predominates.”

Still, he added that while Mars can afford a purchase like this, the price could make it difficult “for generating a strong return.” Even though Kellanova has a “strong portfolio of brands,” Saunders said many of its products are mature and recent growth “has been less than impressive as consumers cut back.”

“Mars would need to put in significant effort to make the acquisition of Kellanova pay off. The question Mars needs to ask, very carefully, is whether it would be biting off more than it could chew,” he said.

A big reason Kellogg split its snacking business from its slower-growing cereal business was to highlight the growth potential in its snacking operations — something that no doubt attracted Mars. Similar to other food companies, Kellanova has been dealing with a slowdown in volumes as inflation leads consumers to cut back on what and how much they purchase.

Earlier this month, the Chicago-based company returned to growth, increasing its annual organic sales and profit forecasts after noting that consumers were purchasing more of its products despite the higher prices. Kellanova has announced new product innovations from several of its household name brands this year — from puffed Pringles Mingles to Eggo Coffee — in an effort to boost sales.

In a statement, Kellanova CEO Steve Cahillane said Mars will be able to “nurture and grow” the Cheez-It maker’s brands by spurring innovation in categories like better-for-you snacks.

“With a proven track record of successfully and sustainably nurturing and growing acquired businesses, we are confident Mars is a natural home for the Kellanova brands and employees,” Cahillane said.