Butterkist sea salt popcorn

KP Snacks CEO Mark Thorpe is confident of reigniting strong growth at Butterkist after striking a deal to break into the popcorn market with the takeover of the category leader this week.

The Hula Hoops, McCoy’s, Skips and KP Nuts maker acquired the popcorn business from private equity-owned Tangerine Confectionery for an undisclosed sum.

A number of trade players were involved in the competitive auction of the brand, with Japanese snack manufacturer Calbee pushing KP close, according to City sources.

The sale price is understood to be about £60m, providing “a healthy” multiple to Tangerine, which put the business up for sale in 2016 to cash in on the booming UK demand for popcorn.

Overall grocery sales of popcorn surged 11.2% to £129.1m as shoppers shifted from more traditional bagged snacks [IRI 52 w/e 25 February], but market leader Butterkist only managed 2% growth to £46.5m as its share was eroded by the growing number of rivals.

“The popcorn market shrank in June after a long period of strong, sustained growth,” Thorpe said. “Butterkist has not been driving the category for a while, but being part of a branded snacks group rather than a confectionery business can get the brand back into good growth and also boost the market overall,” said Thorpe.

He added the first steps following the takeover of the manufacturing site in West Yorkshire, the largest popcorn facility in Europe, is to focus on the core Butterkist range.

It’s a similar strategy to the recent focus on McCoy’s and Hula Hoops, which KP has worked back into double-digit growth.

KP, owned by German group Intersnack, is growing significantly faster than main rivals in the challenging bagged snacks market, with value up 4.3% and volume 3.9% in the past year [Nielsen 52 w/e 17 June 2017], thanks to investment in advertising, promotions and customer activations.

Thorpe said: “The deal gets us into a category we are not in at present. We are also not very strong on sharing so Butterkist adds real value and means we now play in most areas of the category.”

The acquisition is the latest in a string of deals in popcorn and follows Kettle owner Diamond Foods takeover of Metcalfe’s, the £300m transaction by Amplify for Tyrells and the investment by Piper Private Equity and JamJar in Propercorn.

Tangerine CEO Anthony Francheterre added: “We are proud to have been instrumental in Butterkist’s development and pleased to pass the baton to KP Snacks to continue its success story. We believe this announcement is good news for both parties and confirms Tangerine’s focus on sugar confectionery, accelerating the development of our iconic brands Barratt, Dip Dab, Fruit Salad and building a stronger category with our customers.”

KP Snacks were advised by Houlihan Lokey and Tangerine Confectionery was represented by Stamford Partners and the KPMG deal advisory team.

“KP has long admired Butterkist as the market leading brand in UK popcorn, an important category with exceptional growth prospects,” said Shaun Brown, Houlihan Lokey managing director in the consumer food and retail group.

“It also has a tremendous facility in Pontefract – possibly the finest popcorn manufacturing site in Europe. KP look forward to building on the great work done by the previous owners and helping the brand go from strength to strength.”

Houlihan Lokey has advised on seven deals in the food and drinks industry so far this year, including the sale of Grenade to Lion Capital, the acquisition of Addo by LDC and the takeover of Whitworths by Anatolia.

Chris Stott, deal advisory partner at KPMG, added: “This deal continues the strong consolidation activity in the UK snacking segment, a trend we expect to continue at pace over the coming year.”