Kraft Heinz Sells Nut Business to Hormel Foods for $3.35 Billion

Kraft Heinz announced last week it has completed the sale of its nut business to fellow food giant Hormel Foods for $3.35 billion. The deal, originally announced on February 11, includes most products sold under the Planters brand, as well as Cheez Balls, Cheez Curls and Corn Nuts branded products. The sale also includes global intellectual property rights to the Planters and Corn Nuts brands and three associated production facilities. 

“The sale of our Nuts portfolio is another important milestone in our transformation,” said Kraft Heinz CEO Miguel Patricio in a company press release. “The divestiture is a great example of our agile portfolio management and will help Kraft Heinz enhance our overall growth profile while enabling our strategic focus.”

The purchase was a smart move for Hormel — the maker of Spam, Skippy and over 40 other well-known brands — since the Planters nut portfolio brought in approximately $1 billion in sales to Kraft Heinz last year. Jim Snee, president and CEO of Hormel Foods, said the acquisition will expand the company’s presence in the growing snack sector as well as broaden its scope for further acquisitions in the space. 

So why is Kraft Heinz ditching Planters and its cane-and-monocle-bearing Mr. Peanut mascot? As part of its five-year turnaround plan, Kraft Heinz executives told investors last fall that they have shifted to looking at how their portfolio can fulfill different consumer needs rather than a series of products and brands. The nut sale will also enable the company to focus on its other growing snack brands including Lunchables and P3.

Related: Why Nestlé and Mondelez are Rethinking Their Portfolios

To help pay down some of its debt, Kraft Heinz has also been trimming less-popular products from its lineup. Last year, it sold part of its cheese business to French multinational dairy company Lactalis for $3.2 billion. But it hasn’t all been sales. The company recently announced it would be acquiring Turkish sauce brand Assan Foods as part of its international growth strategy.

“We believe Assan Foods is a high-performance organization that brings best-in-class local innovation and production of sauces and tomato products, as well as a significant distribution network in the fast-growing foodservice channel…” said Kraft Heinz’s international zone president Rafael Oliveira in a company press release.

Earlier this month, Reuters reported that Kraft Heinz plans to invest nearly $200 million in its food manufacturing facility in England over the next four years. The investment — which would be the company’s largest expansion of an existing manufacturing site outside the US in nearly two decades — will be used to modernize manufacturing capabilities in post-Brexit Britain. 

Kraft Heinz is also coming out of the ketchup shortage it experienced earlier this year. Patricio recently told Time Magazine in an interview that the company saw the shortage coming last July, so it built eight new production lines and will increase its capacity by 25 percent. Since Heinz accounts for 60 percent of the ketchup market, the bounce back is likely to be profitable for the company as a whole.

In the first quarter of the year, Kraft Heinz reported a 3.9 percent increase in net sales and an 18.5 percent increase in gross profit. With “better than expected” first quarter sales, Patricio said, “Looking forward, we will continue to focus on leveraging our tremendous scale by investing to improve our capabilities and overall agility.”