Dive Brief:

• 坎贝尔汤是购买Sovos麸皮ds for $2.7 billion, or $23 a share, expanding the New Jersey company’s presence in meals and premium offerings.
• The acquisition will allow the CPG food maker to add pasta sauces, dry pasta, soups, frozen entrées, frozen pizza and yogurts to its portfolio. The purchase is highlighted by the Rao’s pasta sauce brand, which accounted for 69% of adjusted net sales last year for Sovos.
• The purchase, the largest for Campbell Soup since it purchased snacks makerSnyder’s-Lance for $4.9 billion purchase in 2018,continues a suddenly active period of M&A in the food space.

Dive Insight:

Campbell has been quiet on large-scale M&A deals under CEO MarkClouse— whotook the reins of the company in early 2019— but the purchase ofSovosmakes a big statement for the maker of Goldfish, Pepperidge Farm,Late July,Pregoand its iconic soups.

As consumers cut back their spending in food amid a run-up in prices, sales volumes have fallen across the majority of companies in the sector. During its third quarter ended April 30,Campbell said sales in its meals and beverages division, which includes soups, V8 andSpaghettiOs,were impacted by pricing and tougher competition. Organic net sales decreased 1% in the period.

Despite challenges across the industry, premium products that replicate the restaurant experience and give shoppers something unique have remained a bright spot.

Campbell will add premium offerings that complement products the company already has in its portfolio.Rao’spasta sauce, for example, will complement its mainstreamPregooffering, whileRao’ssoups will add to its enviable Campbell Soup brand as well as its organic line in Pacific.

Sovos,which came public in 2021, has been growing rapidly. Its flagshipRao’sbrand grew organic net sales by more than a third compared to the prior fiscal year. In its most recent quarter,Sovos posted a 16.3% jump in organic net sales, with volumes rising despite higher pricing.

“SovosBrands is the most compelling growth story food right now,” MickBeekhuizen, president of meals and beverages at Campbell, said in an interview. “It is clearly, from my perspective, the most compelling fast-growing growth story in food that's out there.”

Campbell’s premium business in its meals and beverage portfolio will climb above 25% with the new brands, up from about 10%,Clouse said told analysts.

Sovoshas prioritized purchasing disruptive brands with recognizable ingredients. The Colorado-based company then innovates the core offerings while expanding them into other areas — for example,Rao’sinto soups andfrozen pizzaandNoosa into gelato.

Beekhuizennoted that whileRao’sis best known for pasta sauces, there are “real opportunities” to bring the brand into adjacent categories, most notably deeper into frozen.

“I’ve been looking atRao’sand what the team has done with great interest for a while, particularly because you've seen obviously the product, we’ve seen the success,” he said. “Everything kind of just came together at this point and time.”

Sovoswill greatly expand Campbell’s small presence in frozen, currently focused on its Pepperidge Farm brand, while giving it a stake in yogurt withNoosa.BeekhuizensaidNoosawould be a “noncore” asset for Campbell but added that the food manufacturer “not in a rush” as it determines how to maximize value for the brand.

For Campbell, the company is able to bring the expertise heft of its supply chain, retail relationships and marketing insight to the brands it’s acquiring, while tapping intoSovos’expertise in innovation, category expansion and the marketing of high-growth brands. Campbell also will boost the efficiency of its own operations through the purchase of ingredients and packaging, such as glass jars.

“I am confident in our readiness to execute and integrate this important acquisition,”Clousesaid in a statement. “TheSovosBrands portfolio strengthens and diversifies our Meals & Beverages division and paired with our faster-growing and differentiated Snacks division, makes Campbell one of the most dependable, growth-oriented names in food."

The deal is expected to close by the end of December.

In recent months, the food space has been a hotbed of M&A activity. In June,Unilever agreed to buy frozen yogurt brand Yasso,whileMars purchased Kevin's Natural Foods. A month earlier,Campbell sold Emerald Nuts to private label food manufacturer Flagstone Foodsfor an undisclosed amount.