What is industry consolidation and why does it matter for investors?

Industry consolidation happens when companies in the same sector merge or acquire one another, resulting in fewer, larger companies. For investors, this matters because acquisition targets often see their stock prices increase significantly when deals are announced (sometimes 20-30% overnight). Meanwhile, companies making strategic acquisitions can benefit from increased market share, cost savings, and improved competitive positioning over the long term. The food industry is currently experiencing significant consolidation as companies adapt to changing consumer preferences and seek scale to compete effectively.

What's the significance of Ferrero acquiring WK Kellogg?

Ferrero's acquisition of WK Kellogg is significant because it represents a major European company entering the American breakfast market and signals accelerating consolidation in the packaged foods industry. This approximately $3 billion deal highlights how larger food companies are looking to acquire established brands with strong market positions. The acquisition creates pressure on other mid-sized food companies to consider their own strategic options, either becoming acquisition targets themselves or pursuing mergers to remain competitive. For investors, this deal serves as a catalyst that may trigger more M&A activity in the sector.

What makes a company an attractive acquisition target?

Companies become attractive acquisition targets for several reasons. They often have strong, recognizable brands with loyal customers but may be struggling with growth challenges that a larger company could help solve. Other attractive qualities include stable cash flow, established market positions, complementary product portfolios, distribution networks, or manufacturing capabilities that would be valuable to an acquirer. Sometimes, companies become targets because they're undervalued relative to their assets or because their products would fit well within a larger company's portfolio, allowing for cost savings and increased negotiating power with retailers.

How do dividend yields relate to food company investments?

Dividend yields represent the annual dividend payment as a percentage of the current stock price. Many established food companies pay regular dividends, making them popular among income-seeking investors. These companies typically generate stable cash flows even during economic downturns (people always need to eat), allowing them to maintain consistent dividend payments. When evaluating food stocks, dividend yield can be an important consideration, especially for companies that may not offer dramatic growth but provide reliable income. During industry consolidation, a company with a strong dividend might be particularly attractive as it generates returns for investors while they wait for potential M&A activity to boost the share price.

14 handpicked stocks

Food Fight: Consolidation in the Packaged Goods Aisle

A carefully selected group of food companies positioned to benefit from the wave of industry consolidation. Following Ferrero's $3 billion acquisition of WK Kellogg, these stocks represent potential acquisition targets or strategic buyers looking to gain competitive scale in a rapidly changing market.

Han Tan | Market Analyst

Published on July 11

Top Picks from This Group

Here are a few of the assets in this group. Create an account to unlock the full list.

Mondelez International, Inc.

MDLZ

Current price

$61.78

As a global snacking powerhouse, Mondelez is a potential major acquirer looking to expand its portfolio with synergistic brands.

Hershey Company, The

HSY

Current price

$189.02

A major confectionery player, Hershey could be an acquirer seeking to diversify its snack offerings or could itself be a target for a larger global en...

A major confectionery player, Hershey could be an acquirer seeking to diversify its snack offerings or could itself be a target for a larger global entity.

ConAgra Foods, Inc.

CAG

Current price

$19.18

With a diverse portfolio of established brands, Conagra is a classic example of a company that could be an attractive acquisition target for a larger ...

With a diverse portfolio of established brands, Conagra is a classic example of a company that could be an attractive acquisition target for a larger firm seeking scale.

Kellogg Co.

Current price

$82.65

Post Holdings, Inc.

POST

Current price

$106.86

Kraft Heinz Company, The

KHC

Current price

$26.07

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12 Month Growth Potential

Use the growth calculator to see how much investing in these assets could return over one year, based on aggregated analyst sentiment provided by Refinitive Ltd.

If you invested across these assets:

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In 12 months it might be worth:

$1,000.00

+38.56%

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About This Group of Stocks

Our Expert Thinking

The packaged food industry is experiencing a major consolidation wave as companies seek to gain scale, enter new markets, and adapt to changing consumer preferences. Ferrero's acquisition of WK Kellogg signals more deals ahead, creating opportunities to invest in potential acquisition targets and strategic acquirers.

What You Need to Know

M&A activity often drives stock price volatility for both targets and acquirers. This collection offers a tactical, event-driven approach to capitalize on near-term opportunities in the food sector. These companies span the consumer staples value chain from ingredient suppliers to snack producers and diversified food giants.

Why These Stocks

These companies were selected for their strategic positioning in the ongoing "Food Fight." Some are established brands that could become takeover targets, while others are potential acquirers with the financial strength to make strategic moves. All are positioned to potentially benefit from industry consolidation.

Group Performance Snapshot

38.56%

Average 12 Month Profit

On average, analysts expect assets in this group to grow 38.56% over the next year.

8 of 14

Stocks Rated Buy by Analysts

8 of 14 assets in this group are rated Buy by professional analysts.

Source: Analyst sentiment is provided by Refinitiv Ltd, a global leader in financial market data with over 40k business clients. Refinitiv Ltd is an independent third party to Nemo. This is not advice.

Why You'll Want to Watch These Stocks

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M&A Premium Potential

Companies that become acquisition targets often see their stock prices jump 20-30% when deals are announced. This collection identifies potential takeover candidates before they hit the headlines.

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Iconic Brands at a Crossroads

These household names are navigating changing consumer preferences and industry pressures, creating both challenges and opportunities. Strategic moves could unlock significant value for investors who get in early.

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Scale Matters More Than Ever

In today's competitive food industry, companies need scale to negotiate with powerful retailers and fund innovation. This consolidation trend is accelerating, potentially rewarding investors in companies positioned on either side of deals.

Get the full story on this Basket. Read our detailed article on its risks and potential.

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