Ferrero acquires WK Kellogg: a win-win cooperation of complementary advantages and resource sharing

Ferrero Group announced on Thursday that it will acquire Kellogg's for approximately $3.1 billion at a price of $23 per share. The transaction will cover WK Kellogg's six manufacturing plants, as well as its marketing and distribution business for breakfast cereals in the United States, Canada, and the Caribbean.

Ferrero CEO Giovanni Ferrero stated in a statement, "In recent years, Ferrero has expanded its business in North America, integrating our renowned brands from around the world with local treasures rooted in the United States. Today's news is a key milestone in this journey, giving us confidence in future opportunities." Gary Pilnick, Chairman and CEO of WK Kellogg, said that this merger will provide resources for Kellogg to develop its brand and "explore areas beyond cereal based foods. Pilinik also stated that Ferrero has a good track record in supporting the communities where it operates.

As consumers turn to protein bars, milkshakes, and other breakfast foods, Kellogg's has been struggling to cope with the long-term decline in cereal consumption in the United States. During the COVID-19 epidemic, as more families chose to live at home, the sales of cereal food increased, but after the epidemic eased, the sales continued to decline. Jiale Shi also faces other issues. At the end of 2021, employees at almost all of its grain factories in the United States went on a three-month strike, which damaged sales. In addition, last autumn, dozens of people gathered outside Kellogg's headquarters in Bartelkirk, demanding that the company remove artificial dyes from its grain products.

Ferrero's acquisition still requires approval from Kellogg's shareholders, and the transaction is expected to be completed in the second half of the year. After the transaction is completed, Kellogg's securities will no longer be traded on the New York Stock Exchange, and the company will become a subsidiary of Ferrero Rocher.

For Ferrero, acquiring WK Kellogg is also a step towards implementing its diversification strategy. As a chocolate candy giant, Ferrero Rocher has many well-known brands under its umbrella, including Rocher, Nutella, and Fantawild. However, it also faces growth bottlenecks caused by diverse consumer tastes and an increasingly younger consumer structure. Especially with the rise of healthy eating concepts, more and more people are losing interest in high sugar snacks. Therefore, Ferrero needs to change its mindset and find its second spring. Acquiring WK Kellogg and expanding the sales channels of Ferrero products to the breakfast cereal market will benefit Ferrero in expanding its product range, enhancing its competitiveness, and market share; The acquisition of WK Kellogg is also an effective way for Ferrero to deepen its global layout and further consolidate and develop the North American market.

This acquisition is a turning point for WK Kellogg, as it has long been constrained by rising consumer health awareness and sluggish sales of high sugar grains, leading to increasing operational pressure. Its asset liability ratio has remained high, and its stock price has consistently underperformed the market due to poor performance. The acquisition by Ferrero is undoubtedly an opportunity for WK Kellogg to improve its business situation, receive funding and sales channel support from Ferrero, and accelerate its business transformation.

For the entire food industry, this acquisition is the current trend of integration in the packaging food industry. Integrating resources and expanding business through mergers and acquisitions is an inevitable result for all food companies seeking differentiated growth in the fiercely competitive product market environment. The merger of Ferrero and WK Kellogg will provide valuable experience for the entire industry.

In summary, the acquisition of WK Kellogg by Italian Ferrero at a price of $3.1 billion is a win-win cooperation, where both parties complement each other's strengths and share resources, promoting the development of their businesses and markets, and bringing new opportunities and challenges to the entire food industry.