Hershey putting its money on popcorn

by Monica Watrous
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SkinnyPop popcorn
Amplify is the second largest manufacturer within the ready-to-eat popcorn category.
 

HERSHEY, PA. — With its proposed acquisition of SkinnyPop parent Amplify Snack Brands, Inc., the Hershey Co. would gain a top spot in the ready-to-eat popcorn category, an industry that is poised for continued strong growth, Hershey’s executives said on Dec. 18.

Michele Buck, Hershey
Michele Buck, president and c.e.o. of Hershey

“This deal, the Hershey Co.’s largest acquisition to date, is expected to create value for Hershey and Amplify’s shareholders and also for consumers, who will soon be able to find these wonderful brands available in more outlets,” said Michele G. Buck, president and chief executive officer of Hershey, during a conference call with securities analysts. “Amplify is a high-growth snack food company focused on developing and marketing products that appeal to consumers’ growing preference for better-for-you snacks. With a 17.5% market share of ready-to-eat popcorns, Amplify is the second largest manufacturer within the category.”

Based in Austin, Texas, Amplify Snack Brands markets products under the SkinnyPop, Paqui, Tyrrells and Oatmega brands. For the 12 months ended Sept. 30, Amplify generated net sales of $372 million, with organic sales growth of 9.4% and 8.6%, respectively, for the third-quarter and year-to-date period.

Krave jerky and BarkThins, Hershey
Hershey acquired Krave in 2015 and barkTHINS in 2016.
 

With a purchase price of approximately $1.6 billion, Hershey’s Amplify takeover is consistent with the company’s strategy to become “an innovative snacking powerhouse,” following the acquisitions of Krave jerky and barkTHINS in recent years.

Upon close of the transaction early next year, SkinnyPop will become Hershey’s sixth largest brand, Ms. Buck said.

Patricia Little, Hershey
Patricia Little, senior vice-president and c.f.o. of Hershey

“With a 13% compounded annual growth rate over the past five years, the ready-to-eat popcorn industry is positioned for continued strong growth,” said Patricia A. Little, senior vice-president and chief financial officer of the Hershey Co. “Ready-to-eat popcorn’s increasing levels of household penetration, combined with on-trend better-for-you attributes, lead us to believe the category will continue to be adopted by an expanding breadth of consumers. Amplify’s status as the premier better-for-you popcorn brand, operating in an industry with strong growth and margin characteristics, makes the company a perfect complement to Hershey’s existing family of brands.

“In terms of integrating Amplify into the broader Hershey business, our plan is to facilitate Amplify’s entrepreneurial agility, while using various levers to build upon and drive continued growth. Specifically, we expect to leverage Hershey’s existing strengths to drive growth through marketing, category management, innovation and expansion. We intend to utilize Hershey’s global marketing strategy to activate Amplify’s brand, while reinventing Amplify’s aisle presence through best-in-class category management.

SkinnyPop pull quote
 

“Hershey’s existing world-class R.&D. team will spur further disciplined product innovation that should result in greater purchase frequency and expansion of Amplify’s usage and consumption occasion. And finally, we plan to expand Amplify’s existing s.k.u.s (stock-keeping units) into mainstream channels using Hershey’s comprehensive distribution network, while simultaneously exploring white space opportunities.”

Hershey expects to unlock $20 million in annual run-rate synergies over the next two years through cost savings and portfolio optimization initiatives. Additionally, the acquisition is expected to be accretive to Hershey’s existing financial targets.

“In the first 12 months following the close, it is our expectation that the transaction will be slightly accretive to adjusted e.p.s., with accretion increasing in year two,” Ms. Little said. “Note that this excludes one-time costs related to the transaction. E.p.s. accretion in both years is substantially higher when excluding transaction-related amortization.”

Amplify Snack Brands
Amplify Snack Brands markets products under the SkinnyPop, Paqui, Tyrrells and Oatmega brands.

Over the next 18 to 24 months, Amplify’s operations will remain in Austin in “a bit more of a standup mode,” Ms. Buck said, to leverage the agility and entrepreneurial spirit of the company.

“Certainly, we’ll look at where the places are that we can capture some integration synergies, certainly things around procurement and some of our corporate functions that can offer support that won’t need to be duplicated, given Amplify wouldn’t be a standalone corporate,” she said. “And then we’ll work together to figure out over time what we think the best integration approach is.”
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