Saucy deal
We've documented the product mix sold by French-based Groupe Danone, a collection that includes yogurt, biscuits, and bottled water. In all these areas Danone is a world leader. The strangest category in the mix is its bottled sauce offerings: HP sauces, Worcestershire sauce, Amoy soy sauce. Those products seemed like a small and isolated pocket, one that didn't have much a future for the company, we thought.
Well, apparently Danone did too. They sold off the small, stagnant division to US food company H.J. Heinz, a major player in bottled sauces, most notably ketchup and steak sauce, along with mustard and other condiments. The deal, for €700 million, expands Heinz's international reach with products closely allied to those that it is currently selling, while allowing Danone to concentrate on what its is good at.
As a Wall Street Journal article ("Heinz Agrees to Acquire HP Foods From Danone", 6/20/2005) puts it:
the transaction represents a common theme among the world's leading food makers. Food companies bulked up through acquisitions in the late 1990s with the hope that broader portfolios would help them compete as grocers consolidated and Wal-Mart Stores Inc. grew. But a number of the acquisitions produced only mediocre results. In the past year, food companies have been selling lines where they don't hold the No. 1- or No. 2-selling product and are instead focusing on their top sellers.
Heinz, the article notes, has been slow to create innovative products in the battle for shelf space. These established sauces are hardly innovations, but they do give Heinz more access with unique staple products. Apparently, Heinz itself is attempting to divest some weak cards in hits hand: such as the Hak vegetable products sold in Europe and the Tegel poultry line in New Zealand.
