Is the Mars-Kellanova merger a gamechanger for the snacks industry?

This acquisition represents a strategic shift for Mars,​​ allowing the company to diversify its portfolio beyond its traditional focus on chocolate and confectionery. The integration of Kellanova’s robust salty snack offerings with Mars’ sweet portfolio also positions the company to better navigate market challenges and capitalize on emerging growth opportunities.

But it's not just about growth; it’s a strategic hedge for Mars against industry volatility, says Rabia Yasmeen, industry manager, E-commerce at Euromonitor International.

With the global cocoa crisis driving up prices and health-conscious consumers increasingly turning away from sugary products, Mars’ move into the savory snacks market is timely.

Yasmeen notes this diversification is crucial as health and wellness trends continue to reshape consumer preferences.

“The acquisition marks a significant pivot for Mars, enabling it to reduce its dependency on cocoa and better align with shifting consumer demands,” she adds.

“As the global snacks industry is poised for over 8% growth in 2024, Mars is positioning itself to capture a larger share of this expanding market, particularly in fast-growing regions like Latin America and MENA (the Middle East and Africa) both expected to see over 14% growth this year.”

The acquisition also has significant implications for the snacks e-commerce market. According to the market researcher, Mars ranks third globally in snacks e-commerce, while Kellanova ranks seventh (data until June 2024). The combined e-commerce value sales for both companies in 2023 is 55% higher than Mars’ standalone sales, potentially reshaping the competitive landscape.

On a market level, it extends the growth of Kellanova’s brands in emerging markets, where Mars has greater influence. For example, Mars has notable presence in China in snacks e-commerce, with the country ranking its second biggest market after the US. However, this penetration is missing for Kellanova and achieving that in the savory segment will unlock new e-commerce growth for the new powerhouse.

“Mars’ acquisition of Kellanova significantly boosts its e-commerce presence, particularly at the brand level,” adds Yasmeen.

“With top-performing brands like Pringles,​​ Cheez-It and Kellogg’s now under its umbrella, Mars is set to challenge the top players in the e-commerce space. This could potentially propel Mars to the second rank globally by 2025, intensifying competition with leaders like Mondelez International.”

Brand synergy

The move will undoubtedly strengthen Mars’ market position but also enhances its brand portfolio. While Mars’ current top e-commerce brands include M&M’s, Galaxy and KIND, the addition of Kellanova’s leading brands provides a significant boost, particularly in the savory snacks category. This is a crucial area where Mars has had minimal presence but now has the potential to become a major player.

“This megamerger will accelerate Mars’ goal to double its snacking business by 2034 and create a stronger foothold in the savory snacks market, which is one of the most resilient snack categories,” says Carl Quash III, head of Snacks and Nutrition at Euromonitor International.

“Snacks remain a high growth area to invest in. But with ongoing industry volatilities – from post-inflationary recovery to industry specific challenges like the cocoa crisis – players are looking at ways to stabilize the success of their future business.

“Mars will become a leader in savory snacks; moving from a negligible presence to rank as the second leading player behind PepsiCo in 2025, globally. The combined assets of Mars and Kellanova will also make it the top player in global snack bars, dethroning General Mills.”

Many of Kellanova’s brands are already pivoting towards healthier offerings, which will position the company to better meet evolving consumer expectations.

“Mars – like the rest of the chocolate and confectionery industry – is having a tough time with pricing and demand shifts due to the cocoa crisis and health conscious moves away from too many sweets,” adds Quash.

“With the promise of this acquisition, Mars will hold a wider range of assets and build a stronger savory presence to complement its dominance in sweets/confectionery. This will also benefit Mars’ future demand with several of Kellanova’s savory brands already repositioning to deliver on increased health demands, such as the launch of Pringle's Harvest Blends and Cheez-It made with whole grains and real cheese.

“Mars will also be able to better buffer the challenges faced in any one part of its business,  like offsetting chocolate pressures with a push in its future savory offerings.”

Industry implications

As Mars emerges as a more formidable competitor across both sweet and savory categories, the industry can expect increased merger and acquisition (M&A) activity as other players respond to this shift and seek to strengthen their own market positions.

“It’s probably the biggest acquisition in snacks industry, with the culmination of a sweet brand portfolio and a salty portfolio,” says Yasmeen.

“As Mars moves to diversify from a coco-dependent brand portfolio, the acquisition marks a hedge against rising cocoa prices and decline in consumption of sugary products as health and wellness trends define new consumer preferences.”

Adds Quash, “We expect an increase in merger and acquisition activity within the snack industry as competition heats up among the leading players.”

So in conclusion, the market researchers believe the Mars-Kellanova merger is not just a major deal but a transformative one that will reshape the global snacks industry for years to come.