More food manufacturers merge
Two frozen food companies, ConAgra and Pinnacle Foods, merged on Wednesday, creating a massive frozen food giant. ConAgra purchased PF for $10.9 billion.
ConAgra owns popular food brands like Orville Redenbacher’s and Chef Boyardee, and Pinnacle Foods owns Hungry-Man and Birds Eye, among others. The companies are the two major leaders in the frozen food industry – an industry that is thriving relative to other food manufacturers.
Further, food manufacturers have struggled recently as grocery stores like Amazon, Walmart, Target, and Kroger continue to push prices down. Although consumers benefit from these lower prices, the manufacturers have lower profit margins.
For example, Kraft Heinz and Campbell Soup are two companies that have struggled recently, facing over 20% decreases in stock value over the past year. In fact, Kraft Heinz will consider following ConAgra’s lead, as rumors of a merger between the company and Campbell Soup have emerged.
Plus, food manufacturers have already started purchasing smaller food companies. In the past few years, Hershey has bought Amplify Snack Brands, Ripple Brand Collective, and Krave Pure Foods. Additionally, Kellogg acquired Chicago Bar last year for $600 million.
Even ConAgra and Pinnacle Foods made strategic merger moves before this massive deal. ConAgra bought Angie’s Artisan Treats last year for $250 million, and Pinnacle bought Boulder Brands in 2015 for roughly $700 million.
However, investors of either company are not impressed by the most recent merger. ConAgra stock has plummeted 6.9% on Wednesday, and Pinnacle Foods dropped 4.1%.
Nonetheless, the merger drives home the fact that food manufacturers must merge with each other to survive. In a time where consumers crave low prices and grocery stores like Amazon and Walmart are willing to feed their hunger, manufacturers are struggling.
Featured image via Wikimedia Commons