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February 1, 2018

Aryzta sells US bakery business Cloverhill in deals with Hostess, Bimbo

Swiss-Irish food group Aryzta has sold its Cloverhill bakery business in the US to Twinkies maker Hostess Brands and Bimbo Bakeries, the US arm of Mexico's Grupo Bimbo.

By Andy Coyne

Swiss-Irish food group Aryzta has sold its Cloverhill bakery business in the US to Twinkies maker Hostess Brands and Bimbo Bakeries, the US arm of Mexico’s Grupo Bimbo.

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The Hostess deal, for an undisclosed sum, includes Cloverhill’s facility in Chicago and its ambient brands Big Texas and Cloverhill. Aryzta had been supplying breakfast items to Hostess from the Chicago plant until June last year.

The transaction with Bimbo Bakeries, also for undisclosed an price, is for Cloverhill’s facility in Cicero, Illinois.

Aryzta said the disposals are consistent with its commitment to address “non-core or non-strategic” businesses and reflect a focus on maximising free cash flow.

Last week Aryzta, which famously makes buns for McDonald’s burgers, cut its earnings guidance for 2018 by 15%, with CEO Kevin Toland talking of the group facing “major challenges”.

Aryzta has faced pressure on its operations in North America in recent quarters, including the costs associated with having to scramble to find replacements for the 800 employees it lost at its Cloverhill bakery in Chicago following a federal raid looking for illegal workers.

Aryzta’s first-quarter results released on 27 November showed North American revenues were down 11.5% on a year-on-year basis.

The company has faced a number of other problems in the US too. These included the failed launch of Otis Spunkmeyer cookies in the retail channel, a move that has led to the loss of contracts to manufacture with companies that compete with the brand. 

Aryzta is also facing a lawsuit from Tennessee firm McKee Foods for alleged supply failure.

It has recently made changes at the top to try and turn its fortunes around. Dave Johnson has been appointed the new chief executive of its North American business, while John Heffernan is its new group chief strategy officer.

MainFirst analyst Alain Oberhuber, who covers Aryzta, said the company had received around a combined US$50m from the two transactions. Approached by just-food, the company declined to comment.

Hostess talked up its acquisition of a batch of the assets. The company’s COO Andy Jacobs said it was “eager to expand our growing breakfast offerings with these capabilities”.

Jacobs added: “The positioning and consumer loyalty to the Big Texas and Cloverhill brands will broaden our participation in a number of distribution outlets. This acquisition will enhance our competitive position as we have the opportunity to further build our branded distribution and market share in the breakfast category within sweet baked goods, as well as enhance new and existing retailer relationships, particularly in the complementary club and vending sales channels.”

Bill Toler, Hostess’ president and CEO, said: “This purchase will enable Hostess to forgo in-house capital investments and create significant value over the next few years.”

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VC funding trends to watch out for in Consumer

Consumer industry investors across the world are betting big on the ESG trend to pick up in the future and are focusing on backing the start-ups and emerging companies working in the meat-alternative products category.   The top two deals in this category were the $500 million investment raised by Impossible Foods and the $347 million investment deal for Future Meat Technologies.  GlobalData’s Venture Capital Investments – Consumer 2021 will help you dive into the capital raising landscape across regions and themes.  Use the report to identify emerging signals and trends across Consumer, formulating winning strategies for the road ahead.   
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