Purchase Review: General Mills Smart to Acquire Blue Buffalo Pet Foods

A new CNN article provided a good overview of General Mills huge Blue Buffalo acquisition (they officially acquired the pet food company in April 2018 for $8 billion).

That’s a top of the market purchase but the good thing for General Mills is the pet product market in general is experiencing tremendous growth and they just got a nice chunk of it, particularly for healthier products which Blue Buffalo centers itself around.

What I was surprised with is how aggressive their growth strategy is in 2019. In the CNN article, it’s said GM plans to double distribution of BB items in grocery and big box retailers. That’s very ambitious.

But beyond the forward strategy, the foray into the pet niche was a savvy diversification of their portfolio. As it stands, most of their brands aren’t health centric and the market momentum is definitely on the healthy side. Organic, vegan, and low sugar foods are taking big bites of the Apple.

With a corral of brands like Pillsbury, Betty Crocker, Wheaties, Cinnamon Toast Crunch, Haagen-Daz, Totino’s, Gardetto’s, Fruit by the Foot, Hamburger Helper, and Yoplait, Blue Buffalo is a nice hedge.

To be fair, General Mills also houses Muir Glen organic foods, Cascadian Farms foods (it’s kinda healthy), Larabar (kinda healthy, too) but the truth is they’re concentrated in human food products that are mostly trending down and they needed a new category. With their new addition, they have just that.

For an initial reaction of of their bid along with the J.M. Smucker competition that likely created a premium, read this Reuters article:

https://www.reuters.com/article/us-blue-buffalo-pet-m-a-general-mills/general-mills-moves-into-pet-food-with-8-billion-blue-buffalo-deal-idUSKCN1G7185.

Note that in the article, journalist Aishwarya Venugopal reveals other corporations which have also made gigantic splashes into the pet market. One is Mars who makes Pedigree and Whiskas pet foods, bought the VCA pet hospital for $7.7 billion in 2017. Also, Cargill bought Pro-Pet.

You can learn more about the healthy/premium angle the cereal behemoth was likely looking for by examining different options of Blue Buffalo dog food here:

bluebuffalo.com/for-dogs/lifestage/adult-dog-food/

This Forbes article breaks down the tremendous growth within the pet industry right now and in general shows why General Mills did what they did. Here are some quick stats:

  • 70% of all US households own a pet
  • people think of pets as their family
  • $72 billion was spent on pets in 2018 and 42% of that money goes to food
  • Millennials own the most dogs and cats of any generation

Although the numbers originally look like GM overpaid, the market growth makes it look they bought into a revenue generator majorly on the upswing.