Kellogg adds RXBAR to organic snacks portfolio

The S13bn cereal giant has announced it is to acquire RXBAR maker Chicago Bar Company for $600m.

The move comes as the Froot Loops and Special K maker faces poor demand in the US as consumers move away from packaged and sugary breakfast cereals, opting for wholesome and organic options.

However, the $600m price tag isn’t cheap at 3.3 times RXBAR's sales.However, the anticipated tax benefits are large and expected to reduce the effective purchase price to $400m.

RXBAR's net sales are expected to be $120m in 2017, forecast on projected 2018 EBITDA to be in the range of 12-14x, inclusive of the tax benefits to the purchase price, said Kellogg.

Helping hand

RXBAR will continue to operate as a standalone business, but will be able to leverage Kellogg’s network.

“Joining Kellogg provides us with the tools and resources to accelerate our growth so the brand can scale even faster than it is today,”​ said Peter Rahal, CEO and co-founder of RXBAR.

According to newly appointed CEO of Kellogg, Steve Cahillane, the acquisition is a strategic fit for Kellogg as the company continues its focus on growth to capitalize on food trends, especially within the healthy snacks platform.

“Adding a pioneer in clean-label, high-protein snacking to our portfolio bolsters our already strong wholesome snacks offering,” ​said Cahillane.

“With its strong millennial consumption and diversified channel presence including e-commerce, RXBAR is perfectly positioned to perform well against future food trends.”​

Radically transparent

RXBAR is a line of clean-label protein bars with a base of egg whites, fruit and nuts; containing no added sugar; and are dairy-, soy- and gluten-free. The bars each pack in 12  g of protein with only 210-220 calories and available in 11 flavors, with additional seasonal and limited-time varieties.

Chicago Bar Co recently launched RXBAR Kids, which contain the same core ingredients as RXBARs, but in kid-friendly flavors and portions.

"We have always been radically candid and transparent with our consumers, and these priorities will remain,”​ said Rahal.

The acquisition follows a trend of big corporations investing heavily in better-for-you-snacking businesses.

Kellogg rivals ConAgra last month bought Boomchickapop popcorn owner Angie’s Artisan Treats, while Hershey added meat-based protein bars after it acquired Krave Foods in 2015.

The acquisition is expected to close by the end of 2017.