Pinnacle Foods' story reads like the shows on home improvement channels. Metaphorically, the company began as HGTV's "Fixer-Upper" and "House Hunters," then segued into "Income Property." With recent independence and a new strategy going forward, it's switching channels to DIY's "This New House," maybe even "Dream House."
But so far no "Flip or Flop."
Pinnacle Foods, based in Parsippany, N.J., spent its first 16 years as an assemblage of cast-off but still profitable grocery staples – Armour canned meat products, Swanson frozen dinners, Duncan Hines mixes, Log Cabin pancake syrups. It flew under many people's radars but amassed a $3 billion food products empire that also turned annual profits for its private equity owners.
But starting with the purchase of Birds Eye in 2009, its launch into a publicly held company in 2013 and kicking into high gear with the 2014-2016 acquisitions of Wish-Bone, Gardein and Boulder Brands, Pinnacle Foods now is poised to compete as a food processor of the future, not just of the nostalgic past.
Pinnacle has been growing around 10 percent a year, from $2.4 billion in 2013 to $3.1 billion last year. It's committed to manufacturing, making most of its own products and doing it in lean and efficient ways. And with its new leadership and public company status, it's invigorating product development – not just product maintenance -- with rewards coming in the form of soaring Birds Eye vegetable sales and Duncan Hines "Perfect Size for 1" cake-in-a-cup singles, which is one of the industry’s largest center-of-store innovations in 2017.
We are pleased to name Pinnacle Foods our 2017 Processor of the Year.
Pinnacle Foods was created in 2001 when it acquired the Vlasic International business, which went bankrupt after spinning out of Campbell Soup Co. The business included Vlasic pickles, Hungry-Man frozen dinners and Open Pit barbecue sauce. A group of investors, including C. Dean Metropoulos, J.P. Morgan and J.W. Childs, owned Pinnacle at the time.
That set the tone for two decades, as Pinnacle acquired and resuscitated once-leading brands from big companies that no longer considered them a part of their core marketing strategy, nor would invest in their marketing and product development.
The next acquisition, in 2004, was Aurora Foods, a collection of discarded brands. Decimated by a 2000 securities fraud scandal that sent its executives to prison, Aurora was preparing a bankruptcy filing when Pinnacle swept in. That deal contributed Aunt Jemima frozen breakfasts (only), Celeste pizzas, Duncan Hines, Lender's bagels, Log Cabin and Mrs. Butterworth's syrups and Mrs. Paul's and Van de Kamp seafood. Two years later Pinnacle picked up Armour canned meats from Henkel North American (formerly Dial Corp.).
"Interestingly enough, I sold Log Cabin to Aurora Foods during my Kraft days," interjects CEO Mark Clouse. A former U.S. Army captain and pilot, he spent 20 years at Kraft and Mondeléz, leaving as chief commercial officer. He has been Pinnacle's CEO since May 2016.
In 2007, Blackstone Group bought out the original three investors. The new owner first helped fund a key acquisition -- Birds Eye and other vegetable brands from Vestar Partners in 2009 – and then began preparing Pinnacle for an initial public offering of stock, which came in 2013. That year also brought the acquisition of Wish-Bone and Western salad dressings from Unilever.
Although Blackstone initially retained a 51 percent interest after the IPO, the fund sold all its shares by 2015. Pinnacle is now 100 percent in public ownership, with no investor holding 9 percent of the company.
Birds Eye may not have looked like such a prize when it was acquired eight years ago, but the subsequent consumer interest in vegetables – and especially in riced vegetables – is making that business the top segment of Pinnacle Foods.
The timing of the Birds Eye acquisition was fortuitous, coming just before the rising interest in vegetables. The next two acquisitions were calculated bets on the future, based on already surging consumer trends.