Heinz Buys Skippy Dog Food, Petuna Cat Food Business From California Home Brands Holdings
The Los Angeles-based maker of Skippy dog food and Petuna cat food said Wednesday that it has agreed to sell its pet food business to foods giant H. J. Heinz for an undisclosed sum.
California Home Brands Holdings, a privately held firm based in Terminal Island, said the sale would include pet food plants in Long Beach, Wilmington, San Leandro and Etiwanda, Calif., and Camp Hill, Pa. The plants employ about 550 people.
The company also makes Skippy Premium, Vet and Sturdy dog foods, Glamour Puss cat food and other pet food sold under supermarket labels. President Robert A. Davies declined to say why the company was selling its pet food operations. Analysts estimated that the company’s top brands chalked up 1986 sales of about $70 million.
Heinz Chief Executive Anthony J. F. O’Reilly said the acquisition was “another step in strengthening our position in the pet food business by building our share of the canned dog food segment.” In July, Heinz acquired the Recipe dog food brand from Campbell Soup Co. for an undisclosed sum.
On the New York Stock Exchange, Heinz stock slipped 37.5 cents a share to close at $47.125.
H. J. Heinz is already a major cat food maker through its Long Beach-based Star-Kist subsidiary, which sells about $350 million worth of pet food annually. Star-Kist sells 9-Lives cat food--the nation’s top selling canned cat food--and Amore brand cat food.
Star-Kist will run the pet food business being purchased from California Home Brands.
“It’s definitely a good fit,” said Nomi Ghez, an analyst for E. F. Hutton. “Heinz is filling in--they’re very big in cat food and are now moving into dog food. That’s the key here: to round out the markets you are in and gain leverage.”
Heinz’s move to expand its pet food business is part of a wave of mergers and acquisitions that has continued through the food industry during the past 20 years. The philosophy behind the mergers is that larger firms are able to lower costs by merging production, marketing and distribution activities and will gain clout among retailers.
Last year, Quaker Oats, maker of Ken-L-Ration, paid more than $800 million for the company that makes Gaines pet food.
“It’s difficult to get shelf space if you’re a smaller company,” said John C. Maxwell, analyst for Furman Selz Mager Dietz & Birney. Besides, “it’s cheaper to buy (an existing brand) than invest” the money necessary to start a product from scratch.
California Home Brands Holdings will keep its other food businesses that make canned tuna, processed tomatoes and peaches, specialty soups and canned meats.
The company traces its corporate roots to CHB Foods Inc., which was bought out and taken private in May, 1985, by New York-based Hermes, an investment firm. CHB’s operations were later merged into California Home Brands.
THE CANNED DOG FOOD MARKET
Percentages are based on total 1986 sales of $863 million. ALPO. . . 28.5% KAL KAN. . . 18.2% CARNATION. . . 12.8% QUAKER/GAINES. . . 16.0% CHB. . . 7.9% Other. . . 16.6%
Source: Advertising Age
