US – The fifth-largest food and beverage company in the world, Kraft Heinz has entered into a definitive agreement to sell its B2B powdered cheese business to Irish ingredients major Kerry Group for US$107.5million.

The transaction expected to close in the second half of 2022, subject to regulatory review and approval, also includes Kraft Heinz’s powdered cheese manufacturing facility in Albany, Minnesota. The 62 employees at the location will be transferred from Kraft Heinz to Kerry.

This deal affirms the M&A strategies of the two food giants, considering that Kraft Heinz said the sale of the powdered cheese unit – which was part of its ingredients business – “reflects the company’s ongoing and active portfolio optimization”.

Market analysts explain that most people are familiar only with Heinz Ketchup, Kraft Mac & Cheese, and Lunchables, and that lack of consumer recognition might be the primary reason that Kraft Heinz was looking to sell its powdered cheese business in the first place.

The company also sold its natural cheese business to Lactalis for US$3.2 billion as the center of a massive deal that required the French dairy giant to divest some of its brands. Last year, Kraft Heinz made a divestment of Planters snack brand to Hormel for US$3.35 billion.

Two years earlier, the Heinz soup maker sold its Canadian natural cheese business to Parmalat, the Italy-based dairy company majority-owned by Lactalis, for CAD1.62bn (then US$1.23bn).

On the other hand, the transaction will be beneficial to Kerry which has been open to acquisition by the addition of offering and supplementing its current cheese and dairy powder business.

In a survey of 8,790 global consumers that Kerry published the day before the Kraft Heinz deal was announced, 62% of respondents said cheese flavors make savory snacks more exciting.

The company which has been bullish on the potential of cheese powders said launches of cheese-flavored snacks outpaced those in the general savory snacking category.

In 2020, Kerry CEO Edmond Scanlon announced a new goal: The company’s ingredients would reach more than 2 billion people around the globe each day by 2030.

To achieve that goal, then Kerry has to double its business in a decade, and the company has used M&A to work toward getting there.

Since the beginning of 2021, Kerry has acquired ayurvedic botanic ingredient maker Natreon, biotech companies C-LEcta and Enmex, functional ingredients company Biosearch Life and clean label preservatives maker Niacet.

Once the transactions are approved and complete, the public food company headquartered in Ireland plans to take the acquired cheese brand to multinational markets.

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