Mondelez is the latest chocolate giant to acquire a healthy snack bar brand, paying £200m for Grenade. Who’s bought what and why?
Boom! There goes another healthy snack bar. Sports nutrition and protein bar Grenade was snapped up for £200m last week by Mondelez – its first UK acquisition since Cadbury in 2010.
It follows the Mars acquisition of Kind (for a reported £5bn), and Ferrero’s swoop for Eat Natural last year.
So why is Big Chocolate going nuts for healthier snacks? And with Mondelez passing up on an opportunity to acquire Grenade from owner Lion Capital in 2019 – and rolling out a range of protein-heavy nut bars, called Cadbury Nuttier, in December – what made it come back for a second bite?
It’s simple, says Rothschild head of global consumer Akeel Sachak. “Since 2019 the brand has grown dramatically and moved more heavily into the mainstream to become the category leader. The potential is there to grow much further under Mondelez and continue to take share away from traditional chocolate countline bars such as Mars bars or Snickers.”
The timing is perfect, adds another City source. Grenade was “reaching saturation point in the UK, but Mondelez can now supercharge distribution”.
Mondelez may also have been influenced by the performance of Grenade in lockdown, as it “weathered Covid surprisingly well”, claims founder Alan Barratt. He’s being modest. “Straight away they adapted to online, Instagram – every aspect of their presence began selling and doing deals”, says a source at a major supplier.
“You would have expected them to be hit quite badly given the convenience factor of their products and that gyms were shut – but they survived and have grown.”
That will have “proven to Mondelez that this is a very sustainable, robust product”, the source adds.
Grenade “has a captive audience and knows how to drive a DTC model properly”, says The Savourists founder Harry Turpin. Indeed, 25% of Grenade’s sales now come through online channels, says Barratt. Which means it is ideally positioned to weather further uncertainty.
The market and the prospects for traditional chocolate, meanwhile, significantly worsened in 2020. First, the category had a disappointing year in the mults, with value sales down 1.5% on volumes up just 0.7% [Nielsen 52 w/e 5 September 2020]. This was not exactly a disaster, but it was hardly a success, either.
Credit where credit’s due: while the category struggled, Dairy Milk cleaned up, adding £68.6m (12%) to its value. But much of this was thanks to Cadbury’s biggest rival Mars being absent from shelves due to a “mechanical breakdown” at its factory. Had it been firing on all cylinders, the picture would have looked different.
Ferrero’s chocs didn’t have much luck in 2020 either: sales of its Kinder and Ferrero Rocher brands fell 5.1% and 2% respectively [Nielsen].
However, Mondelez will be conscious of Ferrero’s acquisition of Eat Natural in December, and the Mars acquisition of Kind (it took full ownership in November) while private equity players want in too, like Peak Rock Capital, which bought Halo Foods in September.
“I think we will see chocolate becoming more of a take-home purchase while snack bars steal share in impulse”
The supplier source says it might be the tip of the iceberg. “I suspect Mars might look again for something that can give them a bit more volume. Pladis could come into the category, because they are big in biscuits and the area that we call ‘health and cereal bars’ does actually sit in the biscuit aisle and is bought by the biscuit buyer.”
In any event, The Savourists’ Turpin sees the Grenade deal as a rising tide with the potential to lift all boats.
It “shines a light on the snack bar category as a whole, which is only going to drive more interest,” he says. “We’re currently fundraising so for investors to actively see what can happen [makes me] very optimistic, just knowing the appetite is there. It gives us as small producers the tools to say ‘look, you can exit, there is opportunity here’.”
Turpin believes the flurry of snack bar acquisitions could signal a sea change for the confectionery aisles – especially with the government’s incoming crackdown on HFSS promotions and advertising, and the wider health trend.
“I think we will see chocolate becoming more of a take-home purchase while snack bars steal share in impulse. Previously you might have bought a Mars bar in the afternoon, whereas now there’s a healthier choice. But then you might crack open a slightly bigger bar on a Friday night after a meal.”
Not everyone will be converted, of course, which is where, for Mondelez, Cadbury Nuttier comes into play.
“They play to a completely different audience,” says Turpin. “It would be incredibly difficult to reposition Cadbury as healthier. It’s an easier play to acquire a brand like Grenade that has a loyal following of healthier snackers.”
So what’s next for Grenade with Mondelez at the helm? First there’s the potential for international expansion. The UK is ahead of the curve when it comes to snack bar consumption. Brits are “by far the biggest bar eaters, at least in Europe”, says our supplier source. “Most of the others lag behind.”
With Europe currently suffering worse Covid infection rates than the UK and trailing behind in vaccinations, it’s clear to see the advantage of having a brand primed for DTC and online marketing. The City source agrees Grenade has “bags of international potential”.
Closer to home, Barratt says he “doesn’t envisage a huge shift to our UK retail strategy”, though he stresses there is “room for improvement”, whether via “continual tweaks being made to products, behind the scenes, or elsewhere”.
Turpin suggests the deal might allow Grenade to lower prices and compete harder against standard confectionery.
If other suppliers follow suit, he says, this could potentially turn a new audience of more value-conscious shoppers on to snack bars. “These products are usually made by startups with a higher retail price. With a backer like Mondelez, Grenade will be able to grow capacity and meet higher demand, which has the potential to reduce the rsp, which will absolutely allow them to compete against chocolate more effectively.”
In the meantime, Grenade is already expanding into new categories. Just this week it made its debut in frozen with a duo of Carb Killa ice cream bars, rolling into Tesco and Blakemore-owned convenience stores.
The message is clear: Grenade is primed, and Mondelez is ready to pull the pin.
Grenade’s rapid rise to success
2010: Grenade is founded by husband-and-wife duo Alan and Juliet Barratt, with an eye to creating an “iconic” weight loss product.
2012: Inspired by early interest, the brand adds a slew of new sports nutrition lines.
2015: Carb Killa, which will go on to become Grenade’s bestseller and core protein bar, makes its debut.
2016: Grenade expands into shakes with a trio of Carb Killa drinks.
2017: Grenade is snapped up by private equity firm Lion Capital in a £72m deal.
2019: Two years on from its sale to Lion, Grenade is the number one protein bar in the UK, with Carb Killa outselling huge names in chocolate confectionery. Lion puts it up for sale.
2021: Mondelez swoops for the brand, splashing £200m on the deal