In a recent blog post, I speculated about why some pet food and human food mergers turn out well – think General Mills buying Blue Buffalo, plus Mars’ and Nestle Purina’s many acquisitions of smaller pet food players – while others, well, don’t. J.M Smucker’s divesture of many of its pet food and treat brands earlier this year, followed by meat giant BRF’s plan to sell its pet food businesses less than two years after acquiring them, prompted my ruminations.
They in turn prompted comments and insights from two longtime industry observers and professionals. “We don’t think there is a single or small number of factors that would predict success or lack thereof in these unions,” wrote Bryan Jaffe, managing director of Cascadia Capital, an investment firm focusing on the pet industry. Commenting on LinkedIn, he said myriad factors are in play.
“That said, it is certainly the case that individual company execution – innovation, sourcing, production/food safety, marketing, distribution – is far more influential than industry conditions,” he added. “A rising tide is not floating all boats.”
Understanding pet food market and culture
Jaffe continued with cautionary advice for human food and similar companies considering a merger foray into pet food. “Those who bought thinking it would be an easy category to create value in without investment, or who bought on the wrong side of the brand/formulation/channel/ownership paradigm going forward, are paying the price,” he wrote. “Pet consumables has become a nuanced market, and those who are trend aligned and can execute are reaping the rewards; it is not for the faint of heart.”
Not to put words in his mouth, but I summarize his comments as: A comprehensive understanding of pet food market trends current and future (beyond just a surface reading of what seems popular now) and willingness to invest in proper execution are key to success for human food companies buying into pet food.
Along those same lines, another industry professional’s comments focused on integration of the two businesses in a merger. Successful integration depends on truth as the entry point, and people and culture as the markers, he said. (He sent his comments privately and requested that I not share his identity.) As evidence, he included examples of less-than-successful integrations, adding, “Ways of working, processes from these added businesses were so different from the legacy businesses that the glue never took.”
Yet he also mentioned successful marriages within the pet food industry of larger players buying smaller ones. In one case, he said, the buyer asked executives of the acquired company to not speak with any of their peers at the parent company for several years; at the same time, people from the parent company refrained from joining any teams within the acquiree during that period. While that led to frustration at times, this “drastic measure” allowed the acquired company to smoothly integrate the parent company’s culture over time, he wrote. “The baby was given enough time to become a grown-up adult before joining the family.”
Big dog company’s culture wins
Great analogy, but this commenter also highlighted an underlying maxim with merger integrations. “Something never varies: It is always the culture of the buyer that wins.”
I think he’s right to emphasize culture. Mergers and acquisitions aside, success within a business – successful execution especially when it comes to a big change, strategy or initiative – nearly always comes down to culture. Leaders who fail to acknowledge that or understand their own company’s culture often fail overall.
As the industry professional commented, citing a famous quote from legendary management consultant Peter Drucker: “Culture eats strategy for breakfast.”
Leave a Reply