20.02.2012

Kellogg is hoping Pringles will satisfy its craving for a salty snack.

The breakfast giant is best known for cereals including Frosted Flakes and Eggo frozen waffles. But on Wednesday, it became the world's second-biggest savory snack maker behind PepsiCo's Frito-Lay with a $2.7-billion deal to buy the potato snack brand from Procter & Gamble. The addition of Pringles bolsters Battle Creek-based Kellogg's cupboard of salty snacks such as Cheez-It and Keebler's Club crackers. It also positions the company to expand at a time when the appetite for on-the-go foods is growing worldwide, particularly in emerging markets like China and India. "When you have people moving to the cities and becoming urbanized, they're less likely to eat foods they grow themselves," said Tom Graves, an analyst for Standard & Poor's who follows Kellogg. "There's a bigger opportunity to sell packaged foods." Kellogg, which gets most of its revenue from North America, is looking for Pringles to help it expand into a global snacking company. Pringles, known for its iconic tube packaging, is sold in more than 150 countries and gets two-thirds of its $1.5 billion in annual revenue from overseas. It's difficult to quantify growth in the global snacking market, but its popularity continues to grow in the U.S. as more people adopt the school of thought that it's better to eat five or six small meals a day, rather than the conventional wisdom of eating three large ones. "That's creating a lot of hungry people," said Phil Lempert, editor of Supermarket Guru, which tracks the packaged food industry. Between 2008 and 2018, the number of "snacking occasions" throughout the day in the U.S. is set to increase by 19%, according to market researcher the NPD Group. And in the past year, sales of snack foods rose 3.3% to $16.6 billion, according to Nielsen. That's on top of a 1.8% growth the previous year. Pringles, which coined the popular slogan in the U.S. "Once you pop, you can't stop," has also benefited from the snack rush. Shipments of the brand increased 5% in the latest quarter, according to Procter & Gamble. The snack, which was first tested in 1968, was packaged in cans to preserve freshness and prevent them from breaking like other chips do. The chips are made from dough that contains just 42% dried potatoes. And despite a common misconception, they're fried, not baked. P&G wanted to sell Pringles, the last of its food businesses, to focus on its core household and consumer goods products. Kellogg was able to swoop in to buy Pringles from P&G after Diamond Foods's proposed $1.5-billion acquisition of the brand fell through.


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