Hershey’s desire to be known as a snack company caused it to spend $1.6 billion to acquire a company that relies on warehouse clubs for more than one third of its annual sales and is best known for its Skinny Pop brand.
In a deal valued at $1.6 billion, Hershey said it would acquire Amplify Snack Brands as an important step in what Hershey President and CEO Michelle Buck said is a journey to becoming an innovative snacking powerhouse that will, “enable us to bring scale and category management capabilities to a key sub-segment of the warehouse snacks aisle.”
Prior to Amplify, Hershey’s most recent deal in the snack world involved the March 2015 acquisition of Krave Pure Foods, a maker of meat snacks.
Amplify had annual sales of $270 million for its most recent fiscal year and 34% of those sales are to Costco and Sam’s Club. The reliance on warehouse club retailers was even higher, about 55%, at the time of Amplify’s public stock offering in August 2015, but since then the company has acquired other brands and achieved broader distribution, lessening its reliance on the club channel.
"Hershey's snack mix and meat snacks products, combined with Amplify's Skinny Pop, Tyrrells, Oatmega, Paqui and other international brands, will allow us to capture more consumer snacking occasions by creating a broader portfolio of brands,” Buck said.
The acquisition will be accretive to Hershey's financial targets given the growth trajectory and margin structure of Amplify's key products, according to Hershey. In addition, Amplify's brands compete in many attractive food categories that are capitalizing on fast-growing trends in snacking with a focus on better-for-you products that deliver clean, simple and transparent ingredients as well as unique flavors and forms.
Amplify’s flagship brand, SkinnyPop Popcorn was launched in 2010 and in July 2014 the company was acquired by the private equity firm TA Associates. Roughly one year , TA Associates took the company public despite its limited product offering and reliance on two key accounts for more than half its sales.