Post Holdings is taking a more nuanced approach to M&A as the business seeks to balance opportunities with share buybacks amid pressure on volumes.
Volumes fell in the fourth quarter across Post’s consumer brands, pet food, breakfast cereal and refrigerated products, while the foodservice division bucked the trend.
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Discussing the latest results with analysts last week, president and CEO Rob Vitale said out-of-home volumes will be supported in fiscal 2026 by the company’s “highest value products”, and alongside retail are expected to “generate considerable cash flow to fund both organic and inorganic opportunities”.
Meanwhile, in light of what he said is a “very challenging volume landscape” in retail products, Post plans to lean retail toward a “focus on cost reduction and profitable brand investments”, and at the same time “continue to review M&A opportunities” for the group business.
Vitale was questioned last week on whether the decreases in volumes at Post and the wider packaged food industry are more structural, rather than cyclical, as the former theme starts to gain traction in the investment community.
“I think the big difference is, the cost of capital has changed dramatically. We’ve been in a long-term decline, and now we’re in what could be an inflection point where we see more increased pressure than decrease,” Vitale countered.
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By GlobalData“I think that starts to develop the strategy. I think in lieu of a reflexive position of, ‘we’re just going to use M&A to get bigger’, it needs to be a little more thoughtful and perhaps a little bit more focused around focus so that we can look at opportunities to be better rather than just bigger.”
Carrying on the debate, a question was posed on whether Post’s historical tilt toward a value proposition might be better served with a focus on premium products targeted at high-income households given the cost-of-living pressures on the lower, middle-income cohort.
“I think I would disagree that the portfolio is built around value. I think the portfolio is built around choice because if you look at each line we are in, we have an array of price points,” Vitale responded.
“I think that the trends that you’re raising, rather than dictating the construct of the portfolio in total, really dictate the direction of innovation. I think in that context, it does suggest, if we have the opportunity to do so, to innovate more towards higher or middle-income consumers.”
In the wider scheme of innovation, Post plans to lean on the rising trend around protein, in cereals for example, and granola products, which, according to Vitale are “areas of the category that are growing better than the rest of the category”.
Nevertheless, Post’s consumer brands division – mainly North America – saw cereal and granola volumes decline 8.1% in the fourth quarter due to “category declines and the lapping of elevated promotional activity in the prior year period”.
Weetabix cereal volumes – mainly the UK – fell 2.9% “driven by the strategic exit of low-performing products”.
Overall group volumes dropped 11.5%, with pet food down 13.2% as a result of “reductions in co-manufactured and private-label products and distribution losses”.
COO Jeff Zadoks explained: “At Post consumer brands, our branded and private-label cereal businesses experienced consumption declines resulting from challenging category dynamics.
“In pet, our volume consumption was down versus a flat category, driven primarily by Nutrich. As a reminder, we are adjusting the value proposition and messaging for this brand, with changes to be in market by the end of fiscal Q2.”
