Blue Buffalo's moves, growth set the stage for acquisition

From its advertising taking on pet food competitors to an IPO and expansion into other channels, Blue Buffalo has made moves to grow and attract attention.

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Photo by shymar27,
Photo by shymar27,

Since Blue Buffalo first entered the pet food market in 2002, and especially in the past few years as the company embarked on an aggressive marketing campaign and experienced rapid growth, it has garnered a lot of attention, from every corner. (Especially from its competitors, whose brands were called out by name in Blue Buffalo’s advertising.)

Any article we have published on about the company has brought in large numbers of readers, among the highest we receive; and if I had a dollar for every time I’ve been contacted by a random investment or private equity firm seeking information and insights about Blue Buffalo, I could retire a rich person today. (For the record: I always politely decline such requests.)

But I believe Blue Buffalo has topped itself with its most recent bombshell: it’s agreed to acquisition by human food giant General Mills. That the purchase price — US$8 billion, or US$40 per share — represents a 23 percent premium over Blue Buffalo's 60-day volume weighted average price is just another indicator of the company’s outsize image and way of doing business.

Human food companies see growth in pet food

Thus, it’s not a surprise that Blue Buffalo attracted the interest and focus of a company like General Mills, which in some ways seems to be following the script written by another human food player, J.M. Smucker, in buying its way into the growing pet food market. And perhaps Billy Bishop, Blue Buffalo’s founder and CEO, telegraphed this deal when he expanded distribution of the company’s Blue Life Protection Formula brand into four large mass market retailers last August, where sales quickly overtook those of other natural brands sold in that channel, the company said.

The timing of the General Mills-Blue Buffalo deal is also similar to when Smucker acquired Big Heart Pet Brands in 2015; both happened in February, setting the stage for an interesting year. The two deals share similarities, too, in terms of matching up distribution channels between the parent company and pet food division. In the Smucker-Big Heart case, its pet food and human food brands are nearly all mass market brands only. Blue Buffalo originally staked its claim in the pet specialty channel, where many of its natural brands still enjoy significant shelf space. Likewise, General Mills’ other divisions and brands include well-known natural and specialty names like Annie’s and Cascadian Farm. In fact, the company is the third largest natural and organic food producer in the US.

Besides adding fast-growing natural pet food brands to that portfolio, General Mills is also getting a big ecommerce player in Blue Buffalo, whose online sales increased 75 percent from 2016 to 2017. That type of heady growth is bound to attract attention, and indeed, General Mills said it was one of the reasons behind the acquisition.

Blue Buffalo rising to fifth largest pet food company

Since Mars Petcare acquired the Iams and Eukanaba pet food brands from Procter & Gamble in 2014, I have read and heard speculation that Blue Buffalo could be the next big acquisition target; that type of chatter only picked up after Smucker acquired Big Heart. After all, Blue Buffalo has quickly risen to become the fifth largest pet food company in the world — and that’s with distribution and sales mostly in the US only.

Every move Blue Buffalo has made in the past several years — aggressive advertising, an IPO, ecommerce and mass market distribution, all to drive ever more growth — seems to have set it up for this moment. I guess the only real surprise is that it didn’t happen until 2018.




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