Chocolate maker Hershey is making a move outside the candy aisle with an agreement to buy Krave, which makes beef jerky and other high-protein snacks. The candy company also reported an 8.8% increase in fourth-quarter net income. Here are the most salient things to know from both reports.
What you need to know: Hershey (HSY) is claiming the company’s acquisition of Krave has two main motivations: a move to tap rising interest in meat snacks and to further the company’s reach in making foods that consumers want to snack on. Hershey’s net sales only increased 2.7% in the fourth quarter, but the company said the estimated $2.5 billion U.S. meat snacks category is growing at a double-digit pace. That highlights the rationale behind Hershey’s move, it wants a slice of a popular food category. Industry analysts like NPD Group have flagged rising interest in protein, with studies showing nearly half of primary grocery shoppers have purchased premium-enriched foods.
Krave, founded by a runner who wanted a snacking alternative to meet his needs as he trained for the New York City marathon in 2009, has generated about $35 million in sales over the last 12 months. Financial terms of the acquisition weren’t disclosed but the deal, which was rumored to occur this week, was reportedly valued between $200 million and $300 million, according to a Reuters report.
“Krave jerky is a great fit to our portfolio,” said Hershey North America President Michele Buck. The company’s other brands include the namesake chocolate bar, Reese’s, Mounds, and Twizzlers.
The big number: Hershey’s net sales and profit for the final quarter of 2014 missed analysts expectations. For example, sales totaled $2.01 billion but fell short of the $2.07 billion estimated by analysts. That was the sixth quarter over the past two years that sales underperformed. However, the sales were higher than the prior year’s level, partly boosted by the company’s acquisition of China snake maker Shanghai Golden Money Food Join Stock Co. Food makers have been adding to their portfolios to help jolt demand as their traditional portfolios have seen stalled interest. In fact, just this week, cereal maker Post Holdings (POST) agreed to buy privately held MOM Brands for about $1.15 billion in cash and stock.
What you might have missed: Hershey’s U.S. business improved sequentially throughout 2014, driven by solid market share gains during the Halloween and holiday season for chocolate, candy, mint, and gum. The company expressed some concern about the competitive environment, saying greater distribution of snacks from established players and newer manufacturers, while helping the overall snack category grow, pressured Hershey’s candy sales during non-holiday periods. That resulted in sales and operating profit that was “below our expectations,” Hershey said.