Smucker sale of pet food brands another sign of active M&A

After record numbers of pet food and pet care mergers and acquisitions from 2020-2022, J.M. Smucker’s recent sale of its brands kicks off 2023 activity.

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(zaretsky.andrey | BigStock.com)
(zaretsky.andrey | BigStock.com)

With J.M. Smucker’s recent sale of most of its pet food and treat brands—including iconic names like 9Lives, Kibbles n’ Bits and Gravy Train—it sent the brands on the next turn of their roller-coaster ride and raised further questions about whether a pet food business can work within a human food conglomerate.

General Mills has seemed to do well with its acquisition of Blue Buffalo and, subsequently, Tyson’s pet treats business, but of course, the name of the game with such large companies is ongoing positive financial results. With the economy on possibly improving but still shaky ground, it wouldn’t be a huge surprise to see other large pet food players following in Smucker’s wake.

(Note: In the Top Pet Food Companies Database listing for 2022, based on 2021 revenues, Smucker ranked fourth globally and may retain that rank, or close to it, in the 2023 listing coming in June, because it will be based on 2022 revenues. But there’s no doubt its ranking will slide in 2024.)

Wild history for iconic pet food, treat brands

Smucker sold its pet food brands, all except Milk-Bone and Meow Mix, as well as its private label pet food business to Post Holdings, another human food conglomerate. Whether Post will fare better than Smucker at navigating the pet food market is an open question.

My more immediate thoughts hew to a sense of amazement at how the brands just sold have journeyed through so many owners and companies. Many of the brands were originally part of (and launched within) Del Monte, which essentially dissolved as a company as it sold its human food brands in late 2013, then renamed its remaining pet food business Big Heart Pet Products. Smucker bought Big Heart in 2015.

Those Del Monte brands also included Natural Balance, which it had acquired earlier in 2013, giving it (and, in rapid succession, Big Heart and Smucker) entry into the superpremium pet food market, though it already had the Nature’s Recipe premium brand. Smucker’s next big move was acquiring Ainsworth Pet Nutrition, which included Rachael Ray Nutrish business, another premium line, in 2018.

Did Smucker bite off more than it could chew with all these acquisitions and additions, as an industry expert recently commented on LinkedIn? Perhaps. It started divesting in December 2020 with the sale of Natural Balance to a private equity investor.

I’m also struck by the separation of the iconic Milk-Bones and Meow Mix brands from their siblings, so to speak. In a press release, President and CEO Mark Smucker said the sale was about prioritizing the company’s “investments and resources in the areas of our business that offer the strongest growth and profit potential. In our pet business this is reflected in our focus on dog snacks and cat food, anchored by our Milk-Bone and Meow Mix brands, respectively.”

But apparently not 9Lives for cat food or dog treats under the Nutrish brand. And, how long will Milk-Bone and Meow Mix continue to show the growth and profit the company expects?

Record pet food, pet care M&A activity

The Smucker sale may foretell another busy year for pet food mergers and acquisitions (M&A) activity in 2023. From 2020 to 2022, the pet care industry registered record numbers of M&A deals: 38 in pet care, pet food and veterinary services in 2022, 58 deals in 2021 and 48 in 2020. This data from Dealogic appeared in a MergerMarket article posted on LinkedIn by Carol Frank, managing director, Birdseye Advisory Group Investment Bank, who specializes in the pet industry.

Quoted in the MergerMarket article, Frank said the pandemic drove record growth for many pet companies, which attracted the attention of investors, which in turn motivated company owners to sell. She cautioned that the rush of pet care deals could slow because some potential acquirees may be deterred from selling due to today’s higher interest rates, waiting to see if those rates ease to better their valuation prospects. However, she added, “demand for healthy and sizeable pet companies remains high.”

In the article, MergerMarket’s analysts even speculated on some possible upcoming deals, including additional acquisitions by BrightPet Nutrition, which has been highly active for the past couple of years. It has more than 150 targets in its M&A pipeline, according to CEO Dave Kowal, and is seeking to double in size under its ownership by A&M Capital.

The analysts also cited PetPlate, which sells “fresh-cooked, human-grade” pet food direct to consumers and is talking with potential investors to raise additional funds. On the retail side, Pet Food Express, a 60-store pet specialty chain in California, continues to seek M&A targets in “complementary brands and independent pet retailers.”

Then there’s Eurocan Pet Products, a Canada-based manufacturer of various chews and meat dog treats. Though it is not seeking investments or to be sold, the founder and president said he fields calls from private equity investors every week.

Further proof—possibly along with Smucker’s sale of many of its pet food and treat brands—that the dynamic pet food and pet care markets remain highly attractive for investment and robust M&A activity.

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