James Amoroso, a Switzerland based food industry consultant, told BakeryandSnacks.com that with the purchase of the Pringles business, Diamond is no longer a “mid-cap regional player” but has sky rocketed to the “big league”.
Diamond will pay $1.5m in shares of common stock and take on $850m of Pringles debt in the deal, which is expected to be completed by the end of this year.
The transaction will triple the size of the California-based company, which adds the 45-year-old Pringles brand to a portfolio that includes Emerald nuts, Kettle Brand crisps and Pop Secret microwave popcorn.
While the transaction will give Diamond access to other markets such as Asia and Latin America, Amoroso said the elevation to global powerhouse status for the San Francisco headquartered firm through the latest deal is ‘much more the story here.’
March last year saw Diamond acquired Kettle in what it said was a move to expand its footprint in the expanding potato chip segment and give the company platform for expansion in the UK and Europe. The deal has proved lucrative, with the brand posting double-digit sales growth since the acquisition.
Pringles, with sales in over 140 countries and manufacturing operations in Europe and Asia, was the fourth biggest snack brand in the world in 2009, after PepsiCo’s brands Lay’s, Doritos and Cheetos, according to Euromonitor International.
Amoroso said that Pringles had been the odd one out “for a long time” among P&G’s product staple which ranges from shampoo to dog food.
"It really didn't fit with its predominant household and personal care portfolio,” said the analyst who said that snacks have very different business dynamics.
And he predicts that P&G’s pharmaceutical division will be the company’s next strategic divesture, with pet food the subsequent division to have a ‘for sale’ sign attached.
Global snack market
Consumption of salty and savoury snacks ranks is expected to show double digit growth over the next five years with market specialists, Global Industry Analysts (GIA), reporting that the global market is likely to be worth as much as $334bn by 2015.
GIA noted an increasingly blurred line between meals and snacks, as well as continued buoyancy in the global snack market – even in the seemingly mature markets of the US and Europe. They note that the Asia Pacific region, Eastern Europe and Latin American markets are experiencing rapid growth.
Greater market penetration will be informed by meeting the demand for guilt-free snacks, innovative packaging, flavours and convenience, said the market researchers.
“Paucity of time, lifestyle changes and the convenience factor are bringing to fore the time-elevating advantages of snack foods and supporting the continuous demand increase for the industry,” added the researchers.