Spam-maker Hormel to buy Skippy for $700M
Hormel Foods apparently has a hankering for a peanut butter and bacon sandwich. The company primarily known for Spam and other cured, smoked and deli meats said Thursday it’s buying Skippy, the country’s No. 2 peanut butter brand, for about $700 million.
Skippy, which was introduced in 1932 and is a staple in American pantries, is intended to increase Hormel’s presence in the centre of the supermarket where shelf-stable foods are sold. It also gives the Austin, Minn.based company a clearer path for growth overseas. Skippy is sold in about 30 countries and is the leading peanut-butter brand in China, where Hormel is looking for growth.
Hormel Foods Corp. currently gets the vast majority of its sales in the U.S., with only about four per cent of revenue coming from abroad. Although swings in peanut butter prices have made growth volatile, sales on average have increased about four per cent annually on a normalized basis, according to a spokesman for Unilever, which currently owns the brand.
In the U.S., the Skippy line consists of 11 varieties of peanut butter. Hormel noted Skippy is the leading brand in the faster-growing subcategory of natural peanut butter. It estimated peanut butter as a $2-billion category.
Hormel expects annual Skippy sales of about $370 million, with almost $100 million of that from outside the U.S. The deal includes Skippy manufacturing plants in Arkansas and China. Hormel said it expects the deal to modestly add to its fiscal 2013 results. The transaction, which still needs regulatory approval, is expected to close early this year.