Boxes, Bags, and Brads: Post Finds MOM a Bargain Buy
Grab ‘em off the bottom shelf while you can: I hereby predict Fruity Dyno-Bites are about to go extinct.
Post Holdings has gobbled up another Minnesota company with a strong brand presence in breakfast food. Post’s first local acquisition was Michael Foods, known for its Crystal Farms and Simply Potatoes brands. Now, as reported in the Star Tribune, Post has agreed to purchase Lakeville-based budget cereal maker MOM Brands, parent to Malt-O-Meal, for $1.15 Billion.
An intriguing aspect of this acquisition is the combination of two different approaches to trademarks. Post primarily markets branded cereals such as Grape Nuts, Alpha-Bits, and Honey Bunches of Oats. In contrast, MOM’s principal products are bagged cereals that replicate well-established branded cereals from the “big guys,” such as Tootie Fruities (the same recipe as Kellogg’s Fruit Loops), Marshmallow Mateys (General Mills’ Lucky Charms) and the aforementioned Fruity Dyno-Bites (Post’s own Fruity Pebbles).
MOM has created a strong collective brand for its cereal line, despite the relatively low consumer awareness of its actual trademarks associated with their individual cereals. The recipes used in making the budget cereals (and the familiar shapes and colors they create) provide MOM’s line with a form of brand by association. When fighting for market share against much larger competitors, MOM’s success demonstrates there are ways to distinguish your company’s products and services through a creative approach to branding.
Last fall, an article in the New York Times singled out MOM Brands as a notable success story as it covered many of the reasons for the breakfast cereal market’s decline. As its rivals lost ground, MOM was building market share by targeting cost-conscious consumers. MOM’s approach of co-opting familiar cereal recipes popularized by rivals, while reducing prices by substituting the conventional cereal box with bags, seemed to be a well-worn path to continued success. At the time, MOM’s cereal business had recently surpassed Post’s in market share.
Now — only five months after the New York Times piece was published — is MOM Brands’ family ownership getting out of the cereal business while the getting is good?
Another Star Tribune article published after the merger was announced reported that while MOM Brands’ performance had been relatively solid compared to rivals over the last five years, in 2014 alone, MOM’s dry cereal business was actually down by nearly 11 percent. This startling fact suggests MOM’s strategy of marketing simply packaged derivative brands (last year, MOM applied for the mark “RAIZIN BRAN,” which given Post’s popular Raisin Bran, is probably going the way of Fruity Dyno-Bites) could only protect the company from the cereal business’s general downward trends for so long. It was however long enough to attract a buyer.
Post Holdings’ stock jumped 18 percent on news of the MOM acquisition, signaling the Wall Street consensus that for the leader of the cereal market’s value segment Post had paid a bargain price.