The makers of Dave’s Killer Bread and Wonder Bread, Flowers Foods, will purchase natural gluten-free cookie and cracker brand Simple Mills to expand its presence in the natural snack category in a $795 million all-cash deal, as some experts predict food and beverage acquisitions will roar back in 2025.
The acquisition of Simple Mills is expected to be “immediately accretive” to Flowers' net sales, Flowers executives shared in a call with investors.
The purchase was made possible by a $795 million term loan from the Royal Bank of Canada, with the deal expected to close in the first quarter of 2025.
“We expect to apply our best-in-class capabilities and deploy additional resources to enhance Simple Mills’ growth by broadening distribution, accelerating innovation and amplifying brand awareness,” said Ryals McMullian, chairman and CEO of Flowers.
Bringing the two companies together with a ‘fairly light touch’
Simple Mills Founder and CEO Katlin Smith will continue to lead the company and maintain operations in Chicago and Mill Valley, Calif.
“Flowers has an esteemed reputation as a caretaker of its acquired companies — both enabling them to continue exponential growth while stewarding and protecting their brand promise. I cannot imagine a better partner for Simple Mills,” Smith said in a LinkedIn post, shortly after the announcement.
This deal marks the company’s first acquisition “of a significant brand” since gluten-free baked goods brand Canyon in 2018, McMullian said. Before that deal, Flowers acquired Dave’s Killer Bread for $275 million in 2015.
Smith and the existing executive team will remain at the helm – a strategic decision to ease concerns the acquisition could change the quality or brand identity. Flowers does not foresee a change in manufacturing within the next five years, McMullian noted.
“We learned so much from the acquisition and integration of Dave’s and Canyon and how to do that right and how to mesh the cultures,” McMullian said. “We will be bringing our expertise in retail customer management and trade promotions and market execution, procurement — all those things that you might expect. We will be bringing those to bear, but by the same token, it will be a fairly light touch, particularly in the early days.”
Flowers seeks to scale Simple Mills
Since Simple Mills’ launch in 2012, it grew market share in the shelf-stable baked goods category and attracted venture capital investors, like Vestar Capital Partners and various angel investors. Simple Mills more than doubled retail sales from 2019 to 2022, the company shared in a release.
Today, Simple Mills is a leader across the natural cracker, natural cookies and baking mix in the natural channel categories, with $143 million, $59 million and $25 million, respectively, according to SPINS data for the year ending Aug. 11, 2024, as shared in an investor presentation.
Additionally, Simple Mills is one of the top five snack bar brands in the natural channel with $14 million in sales, according to SPINS data for the same period.
Flowers will expand Simple Mills’ distribution and snack bar portfolio, McMullian explained. Dave’s Killer Bread broke out of the bread aisle in early 2023 with a line of organic snack bars, and Flowers will take lessons learned from that acquisition to incorporate Simple Mills into the larger organization.
“Simple Mills products are carried in more than 30,000 stores, and significant opportunity remains to grow sales with those existing customers by increasing the average number of items carried at each store. For example, category-leading brands offer more than twice as many items per store than Simple Mills does, which presents attractive potential upside. We see additional opportunity to expand distribution by adding new retail partners and existing channels,” McMullian said.
Is this the start of an M&A frenzy?
In the second half of 2024, the food and beverage industry experienced an uptick in major acquisitions following a drought of major deals.
Most notably, Mars acquired Kellanova — the parent company of Pringles, Pop-Tarts, Cheez-It and other iconic snack brands — for $35.9 billion in one of the largest deals in food and beverage history. However, Mars rival Hershey rejected a bid from Mondelēz due to the offer being too low.
PepsiCo snapped up Mexican-inspired snacks and food maker Siete Foods for $1.2 billion in October, followed by the full acquisition of the Sabra and Obela brands for $244 million from Israeli food manufacturer Strauss Group.
2025 is projected to be a banner year for food and beverage M&A activity, as the industry faces “a perfect storm right now of policy, politics, credit and banking,” Geoff Coltman, SVP of food and beverage consulting firm Catena Solutions. Brands will be “traded like trading cards,” as major CPG companies reassess their organizational strategies, Coltman added.
