Mars’ Acquisition of Kellanova Sparks Significant Opportunities for IT Service Providers | Blog
Mars’ acquisition of Kellanova could be the biggest acquisition announcement in the retail and consumer packaged goods (CPG) industry in 2024. With a price tag of US$83.50 per share, Mars has paid a substantial sum of US$35.9 billion for one of the largest snacking companies, which generated US$13 billion in revenue just last year. This acquisition positions Mars as a major player in the snacking category in the US, ranking just behind PepsiCo, which owns Frito-Lay. Read on to learn how this affects the CPG market and its IT service providers.
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Back in October of 2023, Kellogg Company finalized the spin-off of their snacking business as Kellanova, and less than a year later, Kellanova may have found a new home with Mars, an acquisition that will be made at a 33% premium to Kellanova’s unaffected 52-week high as of August 2, 2024.
But how does this acquisition affect the CPG landscape and its IT service sector?
- CPG companies are looking to diversify their portfolios
Post-pandemic, the trend of individual snacking has been increasing, with US consumers increasingly substituting traditional meals with various snack options. Hershey’s acquisition of Dot’s Homestyle Pretzels, Mondelēz’s acquisition of Chipita, and Nestlé’s acquisition of The Bountiful Company all reflect CPG companies’ efforts to broaden their range of snacking options for customers.
Mars’ acquisition of Kellanova is another example of this trend. As one of the leaders in the sweet snacking category, Mars now enhances its portfolio with savory snack options by adding billion-dollar brands such as Pringles and Cheez-It.
- Investments in data and Artificial Intelligence (AI)/Machine Learning (ML) will rise along with new sustainability initiatives
Kellanova has listed data, AI, and machine learning as some of their top tech priorities for 2024, which aligns closely with Mars’ tech focus. Recently, Mars, particularly through its Snickers brand, announced a partnership with José Mourinho to pioneer a fully authorized AI clone for unique fan engagement.
Mars has traditionally embraced technology solutions to enhance sustainability in sourcing and manufacturing for their brands. The acquisition of Kellanova opens additional opportunities for Mars to advance its sustainability practices further.
- Mars will require substantial consulting and system integration support
Every merger and acquisition is accompanied by substantial investment in post-merger integration and consulting services. A detailed approach is required to integrate the IT infrastructure of the two companies, consolidate technology vendors, and eliminate redundant applications and platforms. The extent to which this integration is needed in the case of Mars-Kellanova is yet to unfold.
Additionally, this presents an opportunity to modernize legacy systems, adopt new IT practices, and implement cutting-edge technologies that enhance operational efficiency and drive innovation.
Kellogg Company has long relied upon a diverse array of technology partners, including SAP, Microsoft, AWS, and Oracle, to support its enterprise applications, data management, and web services. In contrast, Mars has integrated SAP, Microsoft, Salesforce, and E2Open into its technology stack. Although a complete IT infrastructure overhaul for Kellanova is improbable, we can anticipate emerging opportunities for innovative service solutions, particularly in system integration and migration.
Conversely, Mars and Kellanova might choose to maintain their separate IT infrastructures, potentially adopting a tiered IT structure with strategic data bridges to facilitate enterprise-level consolidation and collaboration.
From a long-term perspective, Mars must focus on identifying the right partners to develop a comprehensive modernization roadmap, adapt their operational models, and refine delivery strategies and sourcing decisions. Investing in the appropriate technologies and tools essential for fostering growth and ensuring operational continuity will be crucial.
- Service provider portfolios will likely reshuffle
Before the spin-off, Kellogg Company, the parent company of Kellanova’s brands, relied on IT service providers such as Wipro, LTIMindtree, and Capgemini while Mars has worked with service providers such as Accenture, TCS, and Cognizant.
The acquisition could potentially result in lost revenue for Kellanova’s current providers due to provider consolidation and the elimination of redundancies. However, providers offering unique intellectual property or specialized technology might have opportunities to increase their revenue by serving a larger enterprise.
Another plausible scenario, as stated above, is that Mars and Kellanova may opt to retain their distinct IT infrastructures and continue with their current service providers. This approach would mitigate the risk of major disruptions to existing systems and practices. However, it could come at the expense of potential synergies, both in terms of service vendor costs and collaborative opportunities. Maintaining separate IT infrastructures may also pose challenges for implementing enterprise-wide IT initiatives.
Ultimately, Kellanova’s IT infrastructure decisions will depend on whether it fully integrates within Mars or is kept as a separate entity. This choice will shape how its IT systems are managed, so it’s important to watch how Mars plans to position Kellanova.
What lies ahead for Mars post-Kellanova acquisition
The deal is expected to be finalized by the first half of 2025, at which point Mars will acquire all of Kellanova’s brands, assets, and operations. This includes its snacking brands, international cereal and noodle portfolio, North American plant-based foods, and frozen breakfast items.
According to a December 2023 article by Forbes, Andrew Clarke, Mars’ Global President of Snacking, stated that Mars aims to double its snacking division’s annual revenue from US$18 billion to US$36 billion over the next decade. The addition of a US$13 billion revenue brand to their snacking portfolio represents a significant step toward achieving this goal. With the right partners supporting its IT and operations, Mars is well-positioned not only to meet but potentially exceed this target.
In conclusion, this acquisition announcement presents numerous opportunities for IT service providers. These include, but are not limited to, system integration, data migration, change management, compliance and regulatory services, revenue growth management, and sustainability initiatives.
We are closely monitoring market and regulatory changes. To discuss the Mars acquisition of Kellanova and its impact on the CPG sector and IT services landscape, please reach out to [email protected], [email protected], and [email protected]
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