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Mondelez's (MDLZ) Clif Bar Buyout to Boost Snacking Portfolio

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Mondelez International, Inc. MDLZ is on track to reshape its portfolio to drive long-term growth. In this regard, the company signed an agreement to acquire a well-known U.S. maker of nutritious energy bars using organic ingredients — Clif Bar & Company. The deal, likely to conclude in third-quarter 2022, is priced at $2.9 billion with added contingent earnout consideration.

The addition of popular brands like CLIF, LUNA and CLIF Kid perfectly complements Mondelez’s high-growth snack bar business. The move creates more than $1 billion in the global snack bar franchise for Mondelez. The buyout will augment MDLZ’s well-being and sustainable snacking portfolio while expanding its presence in Baked Snacks. The envisioned acquisition accelerates the company’s efforts to lead the future of snacking by winning in biscuits, chocolate and baked snacks while continuing to scale the flourishing snack bar business.

Management anticipates the acquisition to augment the top line in the second year. The move will also generate cost synergies by utilizing MDLZ’s global and North American scale to widen Clif’s sales distribution while deepening penetration across existing and new customers as well as channels in the United States. Mondelez will continue to operate the Clif business from its headquarters in Emeryville, CA. Management will manufacture the Clif products in its existing facilities in Twin Falls, ID and Indianapolis, IN.

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Accretive Acquisitions Driving Growth

The Zacks Rank #3 (Hold) company is always keen on expanding its business through acquisitions. On Apr 25, 2022, Mondelez unveiled that it inked a deal to buy Ricolino, which will likely strengthen the company’s Mexican footprint. In January 2022, the company acquired Chipita S.A., a major producer of sweet and salty snacks in Central and Eastern Europe. Prior to this, Mondelez took over a renowned sports performance and active nutrition brand — Grenade — in 2021. Certainly, Grenade’s on-trend and tasty products position Mondelez to grow in the U.K. and other markets. Further, the company acquired an Australia-based food company — Gourmet Food Holdings — which operates in the premium biscuit and cracker category. Mondelez completed the acquisition of Hu Master Holdings, the parent company of Hu Products on Jan 4, 2021. Notably, the acquisition of Hu provides further growth opportunities in chocolate and cross-category potential in crackers for Mondelez. We note that the Chipita, Grenade and Gourmet Food buyouts contributed to the company’s top line in the first quarter of 2022.

Several other companies in the food space are benefiting from acquisitions like McCormick & Company MKC, Hormel Foods Corporation HRL and The Hershey Company HSY. McCormick increased its presence through acquisitions to enhance its portfolio. MKC bought a 100% stake in FONA International, LLC and some of its affiliates. FONA’s diverse portfolio helps McCormick bolster its value-add offerings and expand the flavor solutions segment into attractive categories. In November 2020, McCormick completed the acquisition of the parent company of Cholula Hot Sauce — a premium Mexico-based hot sauce brand.

Hormel Foods is strengthening its business on the back of strategic acquisitions. In June 2021, the company acquired the Planters snacking portfolio. Prior to this, HRL acquired Texas-based pit-smoked meats company Sadler's Smokehouse in March 2020. The buyout is in sync with Hormel Foods’ initiatives to strengthen its position in the foodservice space.

Hershey is undertaking buyouts to augment portfolio strength and boost revenues. In December 2021, Hershey acquired Dot’s Pretzels LLC — the owner of Dot’s Homestyle Pretzels — a leading brand in the pretzel category. The addition of Dot’s Pretzels is a perfect match for HSY’s growing salty snacking portfolio. The company also acquired Pretzels Inc. from an affiliate of Peak Rock Capital. The acquisition expands Hershey’s snacking and production capabilities.

Returning to Mondelez, we believe that the company’s focus on undertaking acquisitions, evident from the latest move, keeps it well-positioned to drive future growth.

The company’s stock has dropped 6.4% over a year compared with the industry’s 11.9% decline. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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