How does Snickers-flavored Pringles sound? How about Starburst-filled Rice Krispies treats? The company that makes Snickers offered to buy the maker of Pringles. That could mean never-before-tried combos are coming. Then again, maybe not. But what it does mean is that Mars, maker of M&M’s and Starburst, has made a major investment in upping its snack game.
Mars entered a $30 billion deal to acquire Kellanova. The acquisition may keep Mars relevant as snacking habits shift.
Kellanova was created last year when the Kellogg Company split into two entities. The new WK Kellogg company will keep producing popular cereals including Corn Flakes, Froot Loops, and Kashi. Kellanova sells many of the company’s most-loved snack brands like Pringles and Rice Krispies Treats as well as a few cereals such as Special K and Coco Pops. Now Mars is enveloping Kellanova into its economic orbit.
The combination of companies may make good business sense (and cents!). It also might draw scrutiny over U.S. government anti-trust laws.
Companies aren’t allowed to control certain products in their entirety. Consider gasoline, for example. If one company owned all the nation’s gasoline, that company would have no competition. That’s sometimes called holding a “monopoly” on a commodity. A company with a monopoly could set prices as high as it wanted.
Having multiple providers helps to incentivize competitive pricing to gain market share—the amount of sales in a specific area that one company can generate. Consumers benefit from those pricing strategies.
Government regulators help to ensure monopolies don’t happen. Then people can buy necessary goods and services at manageable prices.
Should regulators be concerned that Kellanova and Mars both sell healthy snacks? Kellanova owns the RxBar and NutriGrain brands. Mars owns Kind and Nature’s Bakery. Put those together under one corporate umbrella—will consumers have nowhere else to go? Currently, there are dozens of other nutritious snacks on the market, so the new alignment probably won’t set off anti-trust alarms.
Mars owns mostly sweet treats and pet food brands like Royal Canin. But salty snacks are gaining popularity, while chocolate sales in the United States, though still great, fell 5.5% over the last year. Even though candies like M&M’s aren’t going out of style, it’s smart for Mars to branch out into salty and savory genres.
The acquisition of Kellanova should be complete by early next year. Mars and Kellanova combined will then control about 8% of snack goodies sales in the United States.
Why? Understanding wise business events and their effects on companies and consumers can help us be smart with our own money, purchases, and investments.
Merger vs. Acquisition
When two companies come together, the result may be called an acquisition or a merger.
Merger: Two companies form a whole new one. Example: Oil companies Exxon and Mobil joined forces and became ExxonMobil.
Acquisition: One company buys another. The new company becomes part of the purchasing company’s conglomerate but keeps its own identity. Example: Amazon bought (acquired) Whole Foods.
