By Karla Paris
The purchase of another food manufacturer is setting up Hillshire for improved profit margins by enlarging its grocery store footprint
Hillshire Brands, maker of products such as Jimmy Dean sausages and Ball Park franks, announced on May 12 it would buy Pinnacle Foods in a deal valued at more than $6 billion. Hillshire has been looking to reach outside of the deli counter for some time and this acquisition allows the company to reach other sections of the supermarket as more consumers are limiting on how much meat they're eating.
Hillshire Brands’ move comes on the heels of the company’s momentum through the first nine months of the company’s fiscal 2014. Net sales of $955 million were up 3.4 percent versus the prior year’s third quarter, driven largely by both the retail and foodservice segments.
The newly formed duo of Pinnacle and Hillshire is expected to produce $140 million in annual savings from improving the supply chain and consolidating expenses. The combined company will have an expanded portfolio and enhanced operating capabilities, including:
- High Quality Brands — the new Hillshire Brands will enhance its category positioning through its brand portfolio of ten #1 or #2 brands, including: Jimmy Dean, Hillshire Farm, Birds Eye, Ball Park, Duncan Hines, Vlasic, Wish-Bone, State Fair, Sara Lee frozen bakery, Mrs. Butterworth's, and Log Cabin, among others.
- Increased Scale and Presence in Frozen, Center Store, and Refrigerated — the combined company’s enhanced scale will increase its presence with its key customer base. With its brands’ strong positions across the frozen, refrigerated, and center store categories, the company will have the opportunity to further enhance its relationships with retailers. By extending Hillshire Brands’ reach into the center of stores and Pinnacle Foods’ reach into refrigerated; the transaction will create a platform with new revenue opportunities.
- Greater Diversification — a larger portfolio across a range of categories will deliver greater revenue and input cost diversification, subsequently increasing the cash flow consistency of the combined company.
- Enhanced Operational Platform — the transaction will bring together two best-in-class operators with a shared low-cost operational approach and scalable infrastructure creating a stable platform for future expansion opportunities.