Snack Food Industry M&A Activity Trends Toward Healthier Options

LAS VEGAS, May 16, 2018 /PRNewswire/ --

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90% of consumers say they snack multiple times a day. The snack business is expected to balloon to $89 billion market in the US. This new trend has companies like Kellogg, Mondelez, Conagra and Campbell Soup Co. devoting more of their marketing and business to the snack industry. This has lead to M&A activity and there are a plethora of smaller companies on the rise that could be prime candidates for the major players to scoop up. Campbell's Soup Co. announced last month a major acquisition of Snyder's-Lance, Inc. for over $6 Billion. Mentioned in today's commentary includes: NightFood Holdings, Inc. (OTC: NGTF), Kellogg Company (NYSE: K), Mondelez International (NASDAQ: MDLZ), Conagra Brands (NYSE: CAG), and Hostess Brands (NASDAQ: TWNK).

Mondelez, just announced a major acquisition of cookie maker Tate's Bake Shop for about $500 million. Tate's cookies are made with ingredients such as brown cane sugar and butter, rather than high fructose corn syrup and vegetable oil, making them more in sync with current eating habits. They even offer gluten free versions of their popular cookies.

This move toward healthier snacks, is why Kellogg's recently acquired the "RX Bar" brand. Mintel, a global leader in market research, just released a report on snack trends identifying "functional nighttime snacks" as one of it's key trends. Companies creating snacks to fulfill this need could be prime candidates for the larger snack companies to acquire.

Some companies affected by this trend include: NightFood Holdings, Inc. (OTCQB: NGTF), Kellogg Company (NYSE: K), Mondelez International (NasdaqGS: MDLZ), Conagra Brands (NYSE: CAG), and Hostess Brands (NasdaqCM: TWNK).

NightFood Holdings, Inc. (OTCQB: NGTF) 

Market Cap: $11.09M, current share price: $0.29 

NightFood (NGTF), operates both NightFood, Inc. and MJ Munchies, Inc.

NightFood, Inc, "The Nighttime Snack Company", is a snack food company dedicated to providing consumers delicious, better-for-you, sleep-friendly choices for evening snacking. According to IRI Worldwide, 44% of snack consumption occurs at night, representing a consumer spend of over $50B annually on nighttime snacks.  

Market research giant Mintel recently released a report identifying nighttime specific food and beverages as one of their most "compelling and category changing" trends for 2017 and beyond.

Currently, consumer's most popular choices are cookies, chips, ice cream, and candy. These options are generally understood to be unhealthy, and often contain ingredients and nutritional profiles that can impair sleep quality. NightFood creates, manufactures, and distributes snacks formulated to help consumers satisfy nighttime cravings in a better, healthier, more sleep friendly way.  

Kellogg Company (NYSE: K) 

Market Cap: $23.96B, current share price: $69.32 

Kellogg just had their Q1 2018 conference call. You can read the full transcript here: https://finance.yahoo.com/news/edited-transcript-k-earnings-conference-200558519.html

Kellogg also acquired RXBar for $600 million late last year.  

Mondelez International (NasdaqGS: MDLZ) 

Market Cap: $57.99B, current share price: $39.13 

Mondelēz International today announced an agreement with The Riverside Company, a global private equity firm, and other shareholders, including Founder Kathleen King, to acquire Tate's Bake Shop for approximately $500 million.  Known for its signature thin-and-crispy cookies with simple, authentic, high-quality ingredients, Tate's is a fast growing, premium cookie and baked goods brand.

Founded in 2000 on Long Island, N.Y., Tate's has cultivated a devoted consumer following across the country. With a strong founder story and on-trend products, Tate's has been one of the fastest growing biscuit brands in the United States over the last 12 months. The brand's sales have quadrupled over the past five years. In 2018, retail sales in measured channels have grown by more than 40 percent through March.

Conagra Brands (NYSE: CAG) 

Market Cap: $14.88B, current share price: $37.81 

Conagra Brands, Inc. (CAG) recently celebrated employees' commitment to sustainability throughout the organization at its annual Sustainable Development Awards. Held each year, the awards call on employees to submit their innovative ideas for ways to improve sustainability within the company with projects that save energy, conserve water and reduce waste. This year, employees entered 57 projects which drove the following results:

• Reduced waste by more than 9,200 tons
• Optimized and improved packaging while using 1,400 tons less material
• Conserved more than 170 million gallons of water
• Reduced greenhouse gas emissions by more than 5,900 metric tons

Hostess Brands (NasdaqCM: TWNK) 

Market Cap: $1.64B, current share price: $12.94 

Hostess Brands, Inc. (TWNK) ("Hostess" or the "Company")recently reported its financial results for the three months ended March 31, 2018.

First Quarter 2018 Summary:

• Net revenue increased 13.1%; excluding the Chicago Bakery2, net revenue increased 5.2%.
• The Chicago Bakery, acquired on February 1, 2018, contributed $14.5 million of net revenue.
• Point of sale increased 6.3% for the 12-week period ended March 24, 2018. Point of sale for the top seven sub-brands increased 8.5%. These sub-brands represent 69.1% of the Company's net revenue.
• The Hostess® brand's market share for the 12-week period ended March 24, 2018 was 17.9%, up 124 basis points. This represents a record market share for the brand since its re-launch in 2013.
• Net income was $29.3 million (including a one-time gain of $12.4 million related to the buyout of a portion of the tax receivable agreement) compared to $24.2 million. Diluted EPS was $0.23 per share compared to $0.15 per share.
• Adjusted EPS was $0.14 per share compared to $0.15 per share.
• Adjusted EBITDA was $47.0 million, or 22.5% of net revenue, compared to $54.5 million or 29.5% or net revenue.
• Cash and cash equivalents of $100.5 million as of March 31, 2018 with a leverage ratio of 4.00x, both driven by operating cash flows of $38.3 million.

The snack food industry is growing and all of these companies are in a growing market.  

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