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May 18, 2018

Why latest Tyrrells takeover is no major surprise

UK-based savoury snacks business Tyrrells is getting its third owner in two years - but the latest deal is no surprise, writes Dean Best.

UK-based savoury snacks business Tyrrells is getting its third owner in two years – but the latest deal is no surprise, writes Dean Best.

Tyrrells, the UK crisp maker, is set to get its third owner in under two years (and its fifth in a decade) but, looking at both sides of the latest deal, the transaction was to be expected.

Intersnack, the Germany-based group behind UK brands like KP Nuts and McCoy’s, this week became the latest business to add Tyrrells to its basket.

Tyrrells was sold to Intersnack by Hershey, which itself only acquired the UK firm in December when it bought US group Amplify Snack Brands.

And Amplify only acquired Tyrrells in 2016, meaning Intersnack is the Herefordshire-based business’ third owner in under two years.

It is just over a decade since Tyrrells founder Will Chase sold a majority stake in the crisp maker to UK-based private-equity firm Langholm Capital, which owned the firm for five years before offloading it to Bahrain-based private-equity firm Investcorp.

Intersnack is, then, set to become Tyrrells’ sixth owner since Chase set up the business in 2002. Tyrrells has become one of the mainstays of the ultra-competitive UK crisp market, with its upmarket sharing bags an example of how a brand can move inception to a nationwide fixture in a large category in a matter of years.

The latest change of ownership presents no major surprises on either side of the transaction.

Hershey’s US$1.6bn acquisition of Amplify, announced on 18 December, caught the eye as it further broadened the US confectioner’s portfolio – expanded in a more limited fashion three years ago with the purchase of US jerky maker Krave – in the more savoury part of the snacks market.

However, Hershey’s geographic profile meant not all of Amplify’s assets appeared a natural fit at what remains a US-centric business. Hershey does have an international presence but the sales of its own confectionery brands in markets like the UK are down at arms length via distributors.

The company does have international operations it manages but these reside in a handful of large, emerging markets such as Brazil, Mexico and China.

Tyrrells’ operations, not just in the UK but also in Germany and Australia, appeared to sit awkwardly with the way Hershey is set up.

Add to that how competitive Tyrrells’ domestic savoury-snacks market can be, with promotions playing such a significant role in the category and with private label making inroads into the company’s core segments, there were immediately questions about whether Hershey had the appetite – or indeed whether it should have the appetite – to roll up its sleeves and do battle.

Hershey is keeping Amplify’s savoury stuff in the US, holding onto brands like Skinnypop popcorn and Paqui tortilla chips, which looks a more understandable play.

For Tyrrells, Intersnack seems an obvious home, with its German stronghold presenting a natural home for the UK arm’s German organic snacks business Aroma Snacks and with its own solid and growing presence in the UK via KP Snacks.

It was in March when UK broadcaster Sky News reported Hershey was exploring the idea of selling Tyrrells. A few weeks later, Hershey, announcing its first-quarter numbers, confirmed it was weighing up the future of the non-US operations of Amplify, which obviously included Tyrrells.

PepsiCo’s market share in the UK suggested it may have struggled to get clearance to buy Tyrrells even if it wanted to acquire the business. Therefore, Intersnack appeared a natural home for Tyrrells, so much so that when your correspondent met senior executives at KP Snacks days after Hershey’s disclosure, it seemed self-evident to ask whether they were interested in buying the business. 

The KP Snacks execs skilfully danced around the questions. “We will continue to look at things that we think may be additive,” KP Snacks CEO Mark Thorpe said, adding there was “nothing at this point” on the horizon.

He announced yesterday: “This acquisition is a fantastic opportunity for us to add premium hand cooked crisps to the KP business. We can now offer our consumers and customers a total savoury snacking category portfolio.”

The acquisition of Tyrrells, once finalised, will be the second Intersnack and KP Snacks have made in the UK in under a year, following its purchase of the Butterkist popcorn brand from Tangerine Confectionery last July.

Intersnack and KP Snacks have got Butterkist’s sales growing again in what has become a tough UK popcorn segment, with years of rapid growth meaning that part of the snacks market became flooded with brands. Growth in popcorn is still there in the UK but it has slowed and Intersnack has performed well getting Butterkist back on track.

In Amplify’s last analyst call as an independent, publicly-listed company in November, the business spoke of the “challenging UK retail environment” but said it had started to see “really solid growth” for Tyrrells in its home market on the back of investment in marketing.

Nevertheless, there is no doubt the UK is home to a very competitive savoury snacks market, particularly in Tyrrells’ core segment of sharing bags. Intersnack and KP Snacks will have to be on their mettle.

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