Utz to purchase chip provider for $41M in transfer to chop prices and develop its manufacturers

Dive Temporary:

  • Utz Manufacturers is shopping for Festida Meals, a producer of tortilla chips, corn chips and pellet snacks, for $41 million, the corporate stated in a press release. Festida is the most important producer of tortilla chips for Utz’s On The Border tortilla chip model. 
  • Utz stated the acquisition of Michigan-based Festida will enhance the availability chain for On The Border and improve the corporate’s capability to develop the geographic presence of the model and others in its portfolio all through the Midwest. The deal is predicted to shut earlier than July.
  • Utz has been on an acquisition binge because it got here public final 12 months after merging with clean test firm Collier Creek Holdings. The corporate has made 4 offers since August.

Dive Perception:

Utz, a producer of chips, cheese balls, pretzels and different snacks, has spent a lot of its existence as a family-owned enterprise with a serious presence on the East Coast. However up to now 12 months, the century-old firm has grown its snack choices and elevated the place its manufacturers can be found.

In September, Utz introduced it was shopping for the H.Ok. Anderson peanut butter-filled pretzel model from Conagra Manufacturers for lower than $10 million. Two months later, Utz stated it was buying Truco Enterprises, a producer of On The Border tortilla chips, salsa and queso, from Insignia Capital Group for $480 million. Then in January, Utz introduced it was buying property associated to Chicago snack model Vitner’s from Snak-King for $25 million.

The acquisition of On The Border was significantly notable as a result of it strengthened Utz’s nationwide footprint, with nearly all of On The Border’s gross sales in rising geographies, whereas giving the snack maker an even bigger presence in mass and membership retail channels. Now, Utz is constructing on that take care of the acquisition of Festida.

Whereas not a model itself, Festida is a serious provider to On The Border. By having manufacturing for the fast-growing tortilla chip in home, Utz has extra leverage to develop the model and develop Festida’s manufacturing capability to its different manufacturers. This can be significantly helpful in serving to Utz perform its growth efforts within the Midwest. 

Festida little question has a pulse on chip demand and traits in Michigan the place it’s situated, along with neighboring states. Utz will now have the ability to profit from Festida’s manufacturing experience, capability and warehousing to develop its presence within the area.

“This strategic mixture will assist speed up progress and develop margins over the long run,” stated Dylan Lissette, CEO of Utz.

Whereas Utz has rapidly added new manufacturers, the corporate is conscious that it must develop and nurture these already in its portfolio.

In contrast to PepsiCo’s Frito-Lay — maker of Doritos, Solar Chips and Lay’s — Utz does not have the identical title recognition throughout the U.S. Merely rising a model in a area the place it is probably not as well-known, or bringing it to a brand new geography altogether, supplies a logical method to develop income. On the similar time, a broader portfolio of manufacturers creates synergies in relation to sourcing elements, manufacturing, delivery and dealing with retailers. Festida is an instance the place synergies and vertical integration can repay.

Utz, which experiences first-quarter earnings on Thursday, boosted income in 2020 to $964 million, a rise from $768 million within the prior 12 months. As Utz continues to mature as a public firm, it will likely be below strain to proceed to develop gross sales. Purchases like Festida, whereas not as glamorous because the acquisition of a brand new model, are an necessary and strategeically helpful method to try this.

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