Dive Brief:
- Post Holdings is slowing the pace of acquisitions as tariffs and economic uncertainty slow “what was an active M&A pipeline,” according to Chief Operating Officer Jeff Zadoks.
- The CPG giant, which has a presence in everything from cereal to refrigerated side dishes, will focus on “smaller tactical transactions” that have a “clear line of sight to synergies,” Zadoks said in the company's second-quarter earnings call last week.
- In February, Zadoks said the company was reviewing a “robust pipeline” of potential acquisitions as it anticipated an uptick in M&A activity across the food industry. Recent tariffs, however, have created uncertainty in capital markets, complicating M&A valuations, Zadoks said during the May earnings call.
Dive Insight:
Post is one of the most active M&A players in the food industry, cobbling together a massive portfolio over the years that includes brands like Bob Evans and Fruity Pebbles cereal. But ongoing economic uncertainty is forcing the company to lightly tap the brakes on the aggressive acquisition strategy that helped it become a dominant force in the CPG sector.
Tariffs are raising costs amid a consumer pullback in spending, and businesses face the prospect of lower sales that could also shrink their overall valuation in a potential acquisition deal. Although Post has taken steps to buy back shares in a bid to position itself for future acquisitions, the company is carefully evaluating new opportunities before pulling the trigger.
Post's most recent acquisition was the $124 million purchase of Potato Products of Idaho, which is representative of the company's current approach to focus on smaller, synergistic deals. PPI complements businesses like Bob Evans, giving the company the ability to take further control of operations, Zadoks said on the company's May earnings call.
The additional capacity also opens the door for Post to enter the private label space as consumers look for value.
“We're seeing that private label has better quality and it's taking some demand away from products like ours,” Zadoks said. “So, with the new capacity that we have available, it enables us to think about how we look at other categories.”
Post Holdings saw net sales in the second quarter decrease 2.3% over the previous year to $1.95 billion.
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