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Mondelez's (MDLZ) Grenade Buyout to Boost Snacking Portfolio

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Mondelez International MDLZ is strategically increasing its presence through acquisitions in order to boost portfolio. Evidently, the company entered into an agreement to acquire majority interest in a renowned sports performance and active nutrition brand — Grenade. Management anticipates concluding the deal by the end of March 2021.

We note that Grenade is one of the leading companies in high-protein bars categories. Moreover, Grenade has been focused on expanding its consumer base and introducing new products like low-sugar bars, shakes, spreads and cookies. Also, it has a solid e-commerce platform with nearly 25% of its revenues coming from digital channels. Certainly, its on-trend and tasty products position Mondelez to grow in the U.K.as well as other markets.

Mondelez expects to run Grenade separately to maintain brand authenticity. Notably, Grenade’s existing senior leadership will keep operating the business and retain a minority equity interest in the company. That said, Mondelez will provide support, resources and international scale to accelerate growth.

Prudent Acquisitions: A Major Focus

Mondelez has always been keen on expanding its business through acquisitions. Recently, the company signed an agreement to acquire a renowned Australia-based food company — Gourmet Food Holdings Pty Ltd. Management expects to conclude the deal in April 2021. On Jan 4, 2021, the company acquired Hu Master Holdings, the parent company of Hu Products. Notably, the acquisition of Hu will provide further growth opportunities in chocolate and cross-category potential in crackers. Moreover, the deal will enable the company to grow distribution network through e-commerce as well as premium conventional retail channels.

In April 2020, the company acquired majority interest in Give & Go, which is a pioneer in fully-finished sweet baked goods. Give & Go’s fast-growing in-store bakery channel is likely to help the company further expand its snacking business. In July 2019, it acquired minority stakes in Perfect Snacks—a leader in the fast-growing refrigerated nutrition bars space. Perfect Snacks offers original refrigerated protein bars as well as organic, non-GMO, nut-butter-based protein bars and bites.

Further, some notable buyouts of the company include acquisition of Tate’s Bake Shop (June 2018), LU biscuit business in 2007 and Cadbury in 2010. These buyouts expanded Mondelez’s routes-to-market around the globe, especially in emerging markets. The company’s focus on undertaking acquisitions to gain scale in its categories and distribution capabilities bode well.

All said, we believe that the acquisition of Grenade will help Mondelez expand into broader snacking and fast-growing well-being categories. Shares of this Zacks Rank #3 (Hold) company have increased 26.1% over a year compared with the industry’s 46.2% growth.

Better-Ranked Food Stocks

The Hain Celestial HAIN, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medifast, Inc. MED — currently carrying a Zacks Rank #2 — has a trailing four-quarter earnings surprise of 17.4%, on average.

The J. M. Smucker Company SJM, currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.

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