1. Comment
May 15, 2019

As Kraft Heinz puts baby food brand up for sale, who are Plasmon’s potential buyers?

Kraft Heinz has put its baby food brand Plasmon up for sale which is currently valued at US$783 million (£601 million). Nestle and Hain Celestial are well placed to take an interest in the bidding.

By GlobalData

Despite efforts to boost sales, the €620 million (£535 million) Italian baby food sector is set on a declining course, primarily attributed to a falling birth rate. Little wonder then that market leader Kraft Heinz has finally had enough and has put its Plasmon brand up for sale.

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The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
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So who are the potential new owners, and why might they be interested in what at first sight appears an unappealing offering?

Plasmon baby food sale

Among the leading global baby food companies, Danone is out of the running due to competition issues, but Nestlé is weak in Italy, and Plasmon would fill a gap in its European business. However, the competition authorities could still object to the resulting increased level of concentration, maybe requiring Nestlé to divest its own brands in order to hold on to the bigger prize of the Plasmon business. Such a condition would require the Swiss multi-national to weigh the pros and cons very carefully before making a final decision.

Another significant player in Europe is Hero, which would likely have no problem with the competition authorities. Although it has not been in a buying mood of late, it may be attracted to Plasmon by the size of the Italian market.

Meanwhile, US company Hain Celestial could find Plasmon a good fit to expand its European operations, adding the top spot in Italy to its leading position in the UK via its Ella’s Kitchen business. This could help to counterbalance the pressure its Earth’s Best brand is facing in its domestic market.

But it is not just the obvious contenders that could be interested in bringing Plasmon under their corporate umbrellas. Lotus Bakeries is one such example. The Belgian company acquired the UK-based Kiddylicious in2018, having earlier acquired Urban Fresh Foods with its Bear brand (2015). It may see this as an unmissable opportunity to give its baby food operation scale.

Another potential purchaser is Deutsches Milchkontor (DMK), which purchased the German baby food business, Alete, in April this year, complementing its existing Humana business. Again, the size of the prize could push DMK into making a second major acquisition in a matter of months.

Chinese baby food and supplements supplier, Health & Happiness (H&H) has begun to make its mark in the global baby food sector, via the takeover of the US-based Healthy Times brand in 2015, and has already signalled its ambitions in Europe when it acquired the French company, Good Gout in October 2018.

However, in view both of the long term decline in baby food consumption in Italy and Plasmon’s shrinking share of sales, the question must be whether this will be an attractive enough offer for anyone to be prepared to shell out the US$783 million (£601 million) that the business is estimated to be worth.

Leading manufacturers in the Italian baby food sector, 2014 to 2018, % volume

Source: The Baby Food Market in Italy, 2019 (GlobalData)

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img

What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
by GlobalData
Enter your details here to receive your free Report.