Ferrero in advanced talks to acquire WK Kellogg in reported US$3B deal

Italian multinational confectionery giant Ferrero is reportedly in talks to acquire US cereal company WK Kellogg in a deal worth a potential US$3 billion.

The acquisition would combine two of the world’s most popular consumer food brands. Shares of WK Kellogg, the maker of Froot Loops and Frosted Flakes, rose about 55% this morning following Wednesday’s preliminary reports stating Ferrero could finalize the deal this week.

Ferrero, which owns Ferrero Rocher, Kinder, and Nutella brands, is valuing WK Kellogg at a substantial premium to its market value of US$1.5 billion, sources told Financial Times. They also added that there is no guarantee the deal will materialize.

The Italian company has acquired a bevy of North American brands in the past few years. In 2022, it bought ice-cream player Wells, securing ownership of its Blue Bunny, Blue Ribbon Classics, Bomb Pop, and Halo Top brands.

In 2019, the group completed a deal to take over Kellogg Company’s cookie, fruit, and fruit-flavored snack, ice cream cone, and pie crust businesses in a US$1.3 billion transaction.

Ferrero also inked a definitive agreement to acquire Nestlé’s US confectionery business for US$2.8 billion in cash the year before.

Kellogg Company split into two independently traded companies, dividing their snacking business into Kellanova and the North American cereal brand WK Kellogg. The latter’s portfolio includes  Rice Krispies, Corn Flakes, Mini-Wheats, Special K, Bear Naked, Raisin Bran, and Kashi.

Evolving consumer demand

The move comes during increased consumer scrutiny and regulatory action on sugar and synthetic food additives.

In March, Robert F. Kennedy Jr., Secretary of the US Department of Health and Human Services, met with top executives from the country’s biggest food companies, including Kellogg’s, to urge them to stop using artificial dyes.

The following month, Kennedy announced phasing out eight artificial dyes from the domestic food supply and ingested drugs by the end of 2026.

According to Innova Market Insights’ 2024 research, consumers are increasingly prioritizing managing nutrition to manage health issues. This shift has seen a reduction in sugar content in F&B and a sharp rise in “no added sugar” claims on products.

The market researcher also notes that most consumers surveyed reported being conscious of limiting or reducing sugar in their diet, followed by fat and sodium.