Published on : May 27, 2015
It was recently announced by a spokesperson from Hormel Foods that the company has paid a whopping US$775 million to take over the stakes of the renowned processed meats maker, Applegate Farms. The deal according to many will be the latest one initiated by a market leader to purchase the smaller rivals in the food industry.
When questioned about the reason behind the decision of acquisition Jeffrey Ettinger, the Chief Executive of Hormel Foods said an increasing number of customers have demonstrated their preference of natural and organic products over synthetic food, which is a major reason influencing the company’s decision.
Deal will include the popular deli meats, dinner sausages, and frozen burger of Applegate to the portfolio of Hormel. Other brands which Hormel encompass are Skippy peanut butter and Spam. The acquisition is likely to reflect positively in the revenues of Hormel. However, the sales for the company won’t be much affected by the deal. According to reports, by 2015, Applegate’s annual sale is expected to reach US$340 million by the end of 2015.
In the last couple of years the index of food industry has reflected better growth in sales of small companies. According to reports a significant number of the smaller companies in the market have registered exponential increase in their sales compared to industry giants. This is one of the reasons why bigger companies are keen on taking over the stake of smaller concerns in the food industry. Some of the recent deals which the market witnessed are Hershey taking over Krave Post Holdings’ MOM brand. Hormel cracked a deal last year which won it the stakes of CytoSports a prominent Muscle Milk Maker.
These steps are taken by leading brands to attract consumers who want food which are considered to be healthier.