New giant in the food industry: Conagra to acquire Pinnacle Foods for $10.9bn

Conagra has agreed to acquire Pinnacle Foods in a $10.9bn cash-and-stock deal, which could create a ‘new giant in the food industry,’ analysts have said.

Both Conagra and Pinnacle have not yet commented on the matter.

Brittany Weissman, consumer analyst at Edward Jones, noted the deal comes as no surprise.

“A lot of people in the food industry have thought these two companies would eventually end up together. This is the third time we’ve heard rumors that Conagra has approached Pinnacle,” she said. 

“It’s interesting to see how this is going to play out, especially at a time when the industry has gone through many changes over the past year,” added Weissman.

“Plus, Pinnacle has some activist investors involved with the company, which might help make a deal more likely to happen today than it was in the past.”

M&A is a huge priority

Dewey Warner, research analyst at Euromonitor, said: “Clearly, Conagra is making M&A a huge priority in the company’s strategy at the moment and going forward as their CEO has said so publicly on multiple occasions, and this broadly follows trends across the food space of larger companies seeking to buy smaller ones exhibiting growth.”

Last year, Conagra tapped into two of the fastest-growing food categories – popcorn and meat snacks – by acquiring Boomchickapop owner Angie’s Artisan Treats and Thanasi Foods, which operates Duke’s jerky.

Warner said: “The advantages in acquiring growth are clear… I think the potential for Conagra to acquire Pinnacle is really an opportunity for the company to haul in some fast-growing brands.

“Pinnacle’s ownership of specialty gluten-free baked goods brands like Udi’s and Glutino are a huge plus in reaching consumers in another growing specialty area,” he added. “Ultimately, if it takes place, this merger could create a really powerful duo and a new giant in the food industry.”

In addition to specialty bakery products, Pinnacle owns a range of snack brands, including gourmet and natural popcorn brand Erin’s, Hawaiian Kettle Style Potato Chips, Husmans’, Snyder of Berlin and Tim’s Cascade Snacks.

The snow queen in the frozen aisle?

Warner noted another advantage of the acquisition for Conagra would be to become dominant in the US frozen food aisle, which has experienced a renaissance lately.

“There has been an emphasis on the influence of fresh food and the growth in the outer perimeter of grocery stores, so a return to growth and interest in the center frozen aisles is notable,” he said.

“Most of this has to do with frozen food companies finally coming around to some reflection and altering the products they have relied on for so long in order to meet consumers where they currently are, as opposed to consumer priorities suddenly shifting back toward processed frozen food.”

To capitalize on this revival, several snack manufacturers have recently created frozen lines of their products, such as Hostess’ deep fried Twinkies and Modern Pop’s snack bars made with flash frozen fruit.

However, Warner believes there are limits to how much these frozen categories can rebound.

“Revamping products to better align with consumer tastes and priorities is absolutely a path to growth in the frozen aisle, but it is not a surefire means to it for all companies,” he said.

“Combining the resources of Conagra and Pinnacle, along with their selections of recognizable and increasingly on-trend brands, could help to solidify a portion of this potential growth for both companies, assuring that they can compete with other large manufacturers, such as Nestlé,” added Warner.