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P&G sells Pringles in $2.3bn deal

San Francisco food giant, Diamond Foods, has bought Pringles from Procter & Gamble in a $1.5 billion deal, making it the world’s second-largest snack company behind PepsiCo.

The transaction, announced Tuesday 5 April, rids P&G of the last of its food brands, since it has shifted mostly to beauty and hygiene products, and builds on Diamond’s growing food portfolio. Diamond, founded in 1912 by a cooperative of California walnut growers, owns Diamond of California, Emerald nuts, Pop Secret microwave popcorn and Kettle Brand gourmet potato chips.

Slowly but surely, P&G has sold off food brands such as Sunny Delight drink, Jif peanut butter and Folgers coffee. Pringles was its last holdout. The sale, expected to close this year, involves Diamond assuming $850 million of Pringles’ debt and giving P&G shareholders 57 percent of its food stock.

The acquisition of Pringles, the iconic potato crisp that comes in a can, will more than triple Diamond’s existing snack business, bringing its total revenue to $2.4 billion, according to Diamond.

“This is going to drastically increase our scale,” said Michael Mendes, chairman, president and CEO of Diamond Foods. “It augments our access to the developing world, and we believe the product is tailor-made to the international markets, where we’re looking to build a platform.”

“This gives Diamond significant scale to compete with Frito-Lay,” said Timothy Ramey, an analyst with D.A. Davidson & Co., adding that the snack company, which purchased Kettle Brand chips last year, is in a better position to grow Pringles. “They’re a snack company. They can breathe new life into the brand.”

Even though Pringles dates back to 1968, when P&G launched the potato crisp and named it after a street in Finneytown, Ohio, it still has a “surprisingly young demographic,” said Ramey. However, the snacks are not doing spectacularly in the United States, said Marcia Mogelonsky, an analyst with the market research firm Mintel International Ltd.

Last year, with the exception of Walmart and convenience stores, Pringles had sales of $288 million in the United States, compared with Frito-Lay’s $2.1 billion, she said. But Diamond may not even have to boost the brand’s appeal here because the crisps are wildly popular overseas, sold in more than 140 countries.

“This is Diamond’s road to the rest of the world,” Mogelonsky said, adding that last year 40 percent of Pringles’ products were launched in Europe, 28 percent in Asia and only 17 percent in North America. “Now, presumably these other countries will make shelf room for other Diamond products.”

It’s a strategy not unlike that of Kraft Foods, which bought Cadbury when it learned that 70 percent of the chocolate sold in India was that brand, she said.

Source: San Francisco Chronicle

Pringles’ weirdest flavours in pictures…. click here


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