>> Consumers have been shying away from sugary and processed foods for years. So where does a household brand such as General Mills find new mouths to feed? Expand from people to pets. Yep, you heard me. General Mills, whose brands include Cheerios and Yoplait yogurt, announced plans Friday to buy upscale pet food company, Blue Buffalo Pet Products, for nearly $8 billion.
Blue Buffalo stocks surged 17% on the proposed deal, but General Mills stock fell on concerns the deal is too costly, and it's taking on too much debt for the purchase. General Mills investors, however, are getting thrown more than just a bone. I'm in New York. Sales at Blue Buffalo topped $1 billion last year, and that's not all.
It is the US market leader when it comes to pet care. As research firm Euromonitor puts it, retail pet food sales are growing more than three times faster than packaged food for human consumption, and that's why General Mills isn't the only traditional food company going to the dogs and cats.
Mars Food, the brand behind Uncle Ben's Rice and numerous candy bars, also makes Pedigree and Whiskas pet foods. It sanpped up animal hospital firm VCA for just under $8 billion last year. Agricultural giant Cargill paid an undisclosed amount for private label pet food maker Pro-Pet at the beginning of the year, and even chocolate giant Nestle is looking to make a deal, calling the $30 billion US pet food market a strategic high growth area for investment.
It already owns the Purina brand. Here's something else consumers may not realize. Nearly all of the most popular pet food brands are owned by a major food conglomerate, but not all of them. Shares of Fresh Pet jumped 8% on hopes it might be the next target of a takeover.