Who bought out Blue Buffalo

General Mills to buy Blue Buffalo pet food for $8 billion

General Mills, which is best known for cereal brands like Cheerios and Wheaties, is branching into the fast-growing pet food business with a multi-billion dollar acquisition.

General Mills announced Friday that it's buying Blue Buffalo Pet Products (BUFF) for $8 billion. The brand makes natural food for dogs and cats.

"We know that pets are family members, as you've heard me say multiple times, and we want to continue to do better for all family members, both non-furry and furry," said Blue Buffalo Chief Executive Officer Billy Bishop, in a call with analysts.

General Mills hasn't sold pet food for about 50 years. Chief Executive Officer Jeff Harmening referred to the purchase as a "portfolio reshaping strategy" in the analyst call.

"Reshaping our portfolio is something we intend to continue to do and we'll probably accelerate," he said.

General Mills has experienced some weak profits because of lackluster cereal and Yoplait yogurt sales. But Wall Street didn't seem to embrace its diversification plan. General Mills (GIS)' stock price dipped 3% in early trading. Standard & Poor's said that it lowered General Mills' rating to BBB "because of the substantial increase in leverage," though the outlook remains stable.

But the acquisition makes sense to Larry Light, a brand revitalization expert who used to be the chief marketing officer for McDonald's (MCD).

"The three most profitable aisles in the supermarket are beverage, snack food and pet food," he said. "General Mills is under profit pressure. To me, it makes a lot of sense to get into beverages, snack food and/or pet food. In many parts of the world, people spend more per calorie to feed their pets than they feed their kids."

The pet industry has been growing rapidly in recent years. The pet care and pet service industry saw about a 10 percent jump in sales in 2016 and a nearly 6% increase in profit, according to data compiled by Sageworks, a financial information company.

Related: Consumers sour on yogurt and cereal

He said this is why Mars, Inc., which is known for candy, owns a couple of pet food brands.

General Mills spokeswoman Bridget Christenson said the company has already branched into the snack bar business, having acquired Lrabar, which has vegan and gluten-free energy bars, 10 years ago.

The company also has Nature Valley, a snack bar brand it developed in the 1970s. Christensen said that Blue Buffalo, with its organic products, is a good fit for the company's health conscious image.

The company also bought natural food company Annie's in 2014 for $820 million.

The Blue Buffalo acquisition is expected to close in May.

CNNMoney (New York) First published February 23, 2018: 2:55 PM ET

General Mills touts Blue Buffalo success story as proof of acquisition, brand growth capabilities

MINNEAPOLIS Net sales for General Mills pet segment, Blue Buffalo, were up 14% to $436 million in the third quarter of the companys fiscal 2021, ended Feb. 28. Operating profit for the segment was up 9% to $102 million.

Nine-months sales for the segment grew 13% to $1.29 billion, with operating profit up 22% to $312 million.

Growth for the Blue Buffalo brand was driven by positive volume growth and market share gains, and partially offset by investment costs for its new BLUE Tastefuls wet cat food portfolio officially launched in mid-March unfavorable net price realization and mix, and increased media investment, the company reported.

One of the most compelling growth opportunities in our portfolio resides within our pet segment, said Jeff Harmening, chairman and chief executive officer of General Mills. Next month marks the third anniversary of our transformational acquisition of Blue Buffalo. As we think about continuing to reshape our portfolio for enhanced growth, we look to our performance with BLUE as evidence of our ability to successfully acquire, nurture and grow brands and businesses where we can leverage the power of General Mills team and capabilities.

Since its acquisition of Blue Buffalo in 2018, General Mills has delivered significant growth for the pet food and treat brand. From 2017 to the end of February 2021, annual net sales were up $450 million at a more than 10% compounded annual growth rate (CAGR), and annual operating profit has grown $120 million at an 11% CAGR.

Third-quarter growth for both wet food and treats was approximately 25%, shared Kofi A. Bruce, chief financial officer of General Mills. The company plans to focus on these two categories, specifically wet cat food, as well as condition-based diets to drive continued growth.

Wet cat food is an attractive, growing segment with roughly $5 billion in retail sales, said Bethany Quam, global president of General Mills pet segment.

The companys new BLUE Tastefuls launch, which will replace its existing Healthy Gourmet cat food portfolio, specifically speaks to this category with an emphasis on natural formulations.

Since we acquired Blue Buffalo, the US pet food category has grown about 4% a year, and recent trends point to continued mid-single-digit growth for the category going forward, Quam said. Natural pet food, which represents around 30% of total pet food sales today, has led the category with 9% growth in calendar 2020. Because we know pet parents want natural, high-quality ingredients for their pets, we expect the natural segment to continue to drive category growth in the years ahead.

General Mills has also increased Blue Buffalos retail and household penetration, growing primarily in the Food, Drug and Mass (FDM) channel. Blue Buffalo has grown from 22% ACV [all-commodity volume] in the FDM channel in 2017 to 86% ACV in 2020.

Additionally, household penetration is up 6% from 2017, and market share has also grown. The company is also focusing on the pet specialty and e-commerce channels to drive growth through its brand awareness strategy deemed Out with the Old, In with the Blue.

In BLUEs early days with General Mills, we invested significantly to continue to build the brand and accelerate BLUEs expansion in the Food, Drug and Mass channel where about 40% of pet food is sold, Quam said. As a result, since the acquisition, weve increased our distribution in FDM weve nearly doubled our household penetration, and weve increased our all-channel market share to about 7.7% in this fast-growing category.

The company continues to grow internationally, with its pet segment up 40 basis points and other product segments up between 30 and 110 basis points. The companys key international markets include Canada, France, the United Kingdom, Brazil and New Zealand.

Overall, the company posted strong financial numbers for the third quarter. Yet, the Minneapolis-based company could face challenges in upcoming financial quarters.

General Mills in the fourth quarter will begin overlapping the period when the COVID-19 pandemic hit and changed consumer eating patterns. Inflation is becoming a headwind, too.

As we look ahead to Q4 and fiscal 2022 where we'll be comparing against pandemic-driven results that included unprecedented global at-home food demand, we plan to introduce a two-year compound growth metric into our quarterly communications, Bruce explained. This will enable investors to compare our results against pre-pandemic periods and give you better visibility into the underlying momentum in our business. In other words, you'll be able to better see how much demand is sticking.

Net earnings attributable to General Mills in the third quarter were $595.7 million, or $0.97 per share on the common stock, which was up 31% from $454.1 million, or $0.75 per share, in the previous years third quarter. Net sales rose 8% to $4.52 billion from $4.18 billion in the previous years third quarter, reflecting market-share gains amid elevated demand for food at home.

Organic net sales were up 7% in the third quarter. General Mills expects full-year organic net sales to increase about 3.5%.

Companywide over the first nine months of the fiscal year, net earnings attributable to General Mills were $1.92 billion, or $3.13 per share on the common stock, which was up 24% from $1.56 billion, or $2.56 per share, over the same time of the previous year. Nine-month net sales rose 8% to $13.6 billion from $12.6 billion.

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General Mills Acquiring Tyson's Pet Treat Business

General Mills, the parent company of Blue Buffalo, agreed to acquire Tyson Foods' pet treats business for approximately $1.2 billion.

The deal includes Tyson's Nudges, True Chews and Top Chews brands, as well as a production facility in Independence, Iowa. Tyson Foods will continue to provide meat ingredients for the pet treats business, which generatedmore than $240 million in sales during the 12 months ended April 3, 2021.

Were proud of the tremendous success of this business and the diligent work by our team to meet growing demand for high quality pet treats, said Noelle OMara, group president of Prepared Foods for Tyson Foods. We believe the time is right to transition these great brands to an established pet foods business where they will complement their existing portfolio.

BofA Securities is acting as lead financial advisor and Siebert Williams Shank & Co. is acting as financial advisor to Tyson Foods on this transaction, which is expected to be completed by the end of the companys 2021 fiscal year, subject to regulatory approval and other customary closing conditions.

Hogan Lovells served as advisor to Tyson Foods in the transaction.The Hogan Lovells deal team includes Mahvesh Qureshi (partner), Derrik Forshee (counsel) and Kathleen Blanchard (associate). The internal Tyson team includes Gordon McGrath (vice president & associate general counsel), Kyle Childers (senior counsel) and Luke Haller (staff counsel).