Josh Sosland, PortraitJosh Sosland, president, Sosland Publishing Co.

KANSAS CITY – The challenges facing consumer packaged goods companies in 2022 have been historic. Cost inflation, supply chain disruptions, a tight labor market and fragile consumer demand have created incessant and unprecedented headaches for management teams, difficulties without a playbook to open for ready solutions.

Perhaps lost amidst the mayhem has been a year full of aggressive strategic moves across the food sector. Major takeovers in the industry have been lacking, but food executives are not simply playing defense, seeking to ride out the storms buffeting the US economy. Instead, industry leaders have taken an array of steps to adapt to an environment that is rapidly changing. These moves certainly are not without risks.

While the actions taken over the past year vary company by company, a selective preview of the corporate profiles in this issue reveals several themes, nearly all of which show the attraction of the snacking sector to food companies.

Perhaps the most common approach to change over the past year were steps taken to reshape the product portfolios of the large CPG companies. While the mergers and acquisitions completed may not have risen to the level of a major CPG transaction, many sizable acquisitions and divestitures were completed. The largest acquisitions were in the snack category. Mondelez International, Inc. made two billion-dollar-plus acquisitions during the year – the Ricolino confectionery business of Grupo Bimbo SAB de CV and Clif Bar & Co. The Hershey Co. paid more than $1 billion for Dot’s Pretzels. Kraft Heinz, Inc. made numerous non-snacking acquisitions during the year in emerging markets.

Divestitures by large CPG companies were even more commonplace during the year than acquisitions. In addition to Bimbo shedding the Ricolino business to focus on baked foods and salty snacks, General Mills Inc. worked to reshape its portfolio by selling its Helper main meals and Suddenly Salad brands while acquiring TNT Crust.  The J.M. Smucker Co. sold its R.W. Knudsen and TruRoots businesses. TreeHouse Foods, Inc. divested a significant portion of its Meal Preparation unit, a business (most heavily dried pasta manufacturing) that was generating more than $2.7 billion annually. The rationale for the transaction was similar to the thinking behind many of the other transactions – to turn TreeHouse into a company with greater focus on snacking and beverages.

Also centered around snacking was the largest transaction announced during the year — the plans of Kellogg Co. to break up into three independent businesses — global snacking, North American cereal and plant-based foods.  Another cereal-based company, Post Holdings, Inc., spun off its 80% share of BellRing Brands, Inc., a beverage business that owns the Premier Protein brand. Other companies sharpening their focus included Danone SA, which announced a four-pillar plan to restore the company’s competitiveness in its core categories.

In the case of stepped-up capital investments and company moves into adjacent categories, snacking once again loomed large. Hostess Brands, Inc., which was rescued out of bankruptcy in 2013 with a series of major plant modernizations, in March acquired a facility in Arkadelphia, Ark., and unveiled plans to invest between $120 million and $140 million to create a “bakery of the future.” Similarly, Mars, Inc. invested $175 million in a confectionery plant in Topeka, Kan. Hershey made major new investments in 2022 to keep pace with demand in addition to commissioning new confectionery lines.

Major capital investments certainly were not limited to the snacking categories. Responding to strong demand for animal-based protein, Tyson Foods, Inc. committed to investing $1.8 billion to open 12 plants over the next two years, including fully-cook facilities, beef and pork plants and value-added chicken plants. Mars, in addition to its candy bar plant expansion, is spending a quarter billion dollars on a pet treat plant in Kansas City and a pet food plant in South Dakota. PepsiCo, Inc., the largest snack foods company in the world, highlighted investments during the year in its beverage business rather than its Frito-Lay North America snack business.

Examples of moves into adjacencies include the introduction of Dave’s Killer Bread snack bars and protein bars by Flowers Foods, Inc., and the exploration by The Coca-Cola Co. of flavored-alcohol businesses.

Notably diminished during the year was investment in plant-based food products. SunOpta Inc. expanded its capabilities in plant-based beverages but many other companies either were dialing back their expansion plans in the plant-based category or even abandoning it altogether.

The reversals suffered by plant-based products, particularly meat alternatives, highlight the risks of making major bets in a highly volatile environment. Major questions continue to hover over tightness in the labor market, the prospects for foodservice and, with dark economic clouds rolling in, the outlook for consumer demand. It is important not to over-generalize about the many strategic actions taken by CPG companies over the past year. And not every company entering or expanding in the snack category will succeed. Still, it is difficult not to be impressed by the bold but calculated risks taken by the industry’s companies to capitalize on longer-term trends they believe likely to remain firmly in place for years to come.