Kellogg Co. will buy Kraft Foods’ $80 million fruit snacks business for $30 million.
The deal helps Kellogg expand its fruit snacks business as the company continues to diversify beyond cereal with its growing snacks business. Kellogg takes over Kraft’s license for Nickelodeon Fruit Snacks as part of the deal, which is expected to close by the end of June.
The purchase also gives Battle Creek, MI-based Kellogg a manufacturing facility in Chicago with 400 workers, who are nearly all expected to stay.
“We entered the fruit snacks business in 2003 and already Kellogg has become the second largest player in the category. This transaction positions us for even greater growth in this part of our business,” said Kellogg North America President Jeff Montie in a statement.
Retail snacks sales in North America account for about 30% of Kellogg’s 2004 sales—more than cereal sales in North America, which was about 25% of Kellogg’s total. Snack sales grew 8%; retail cereal was up only 2% in 2004. Kellogg’s total sales were up 9% in 2004 to $9.6 billion, per Kellogg.
For Kraft, the sale tightens its portfolio even further to focus on core businesses, part of its growth plan adopted last year (PROMO Xtra, Jan. 29, 2004). Northfield, IL-based Kraft announced plans to sell its $90 million yogurt business to CoolBrands in December for $59 million, the UK Dessert business to Premier Foods for $135 million, also in December, and its sugar confectionery business to Wm. Wrigley & Co. in November (for $1.5 billion).
The fruit snacks sale “is part of our key strategy of transforming our portfolio,” said Kraft President-North America Commercial Dave Johnson in a statement. “Through innovations, investments, acquisitions and divestitures, we’re focusing our portfolio on businesses that offer Kraft sustainable competitive advantage.”