Smucker dumps Pillsbury Doughboy for $375 million

J.M. Smucker Co. is selling its U.S. baking business to a private-equity firm for $375 million, including debt, mirroring moves by other food companies to divest decades-old brands whose sales are in decline because of changing consumer tastes.

Smucker said Monday that Greenwich, Conn.-based Brynwood Partners would buy Funfetti and Pillsbury baking mixes and Hungry Jack pancakes, among other brands. Smucker put the baking business, which generated 5% of its revenues, up for sale in April.

While the fluffy, white Pillsbury’s Doughboy wearing a chef’s hat charmed Americans into buying the brand for decades after his 1965 debut, his effectiveness has waned.

Mark Smucker, chief executive of the Orrville, Ohio company, said in February that he hadn’t invested much in Pillsbury over the prior year because it would have hurt profit. "We consciously chose not to go deep, " he said on an earnings call.

Smucker has owned the business since 2004, having bought it for $840 million, including debt. Then called International Multifoods Corp., the baking business was a collection of brands including Pillsbury dry mixes and flour, and a canned milk line that Smucker divested already.

Like many of its peers, Smucker is investing in faster-growing businesses like coffee and pet food while disposing of brands that were dragging down sales. It is trying to give its Folgers coffee brand a higher-end makeover and said in April that it would buy pet-food maker Ainsworth Pet Nutrition LLC for $1.7 billion.

Other food makers are also selling off older brands that are hindering their earnings potential. General Mills Inc. sold its Green Giant frozen-vegetable line in 2015 and Nestle sold U.S. candy brands including Butterfinger and Baby Ruth this year.

For Smucker, the baking business entered a protracted decline after several years of growth as consumers started buying freshly baked goods and leaving cake-mix brands on the shelf.

Competition also came from Pinnacle Foods Inc., which introduced Duncan Hines single-serve microwavable cake mixes that have eaten into Pillsbury’s market share. The brand’s sales volumes have declined for at least the past six years, according to company filings.

Brynwood’s Chief Executive Henk Hartong said he sees potential especially to expand sales of Funfetti. The multicolored cake mix had about $50 million in sales in fiscal 2018. Mr. Hartong thinks he can apply the brand to other products like snack cakes and ice cream, similar to the resurgence private-equity owners have brought to Twinkies recently.

"If we are going to outmaneuver Betty Crocker and Duncan Hines, we are going to do it by being more responsive to retailers and consumer trends, " he said in an interview. General Mills owns Betty Crocker.

Brynwood manages more than $1 billion for its investors and specializes in carving out underperforming businesses from food giants.

The firm bought the Juicy Juice brand from Nestle in 2014 and a controlling interest in SnackWell’s low-fat cookies from Mondelez International Inc. in 2013.

"We’re not afraid of a category with challenges," Mr. Hartong said.

Write to Annie Gasparro at [email protected]

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