Princes Group has had a history growing through strategic investments and inorganic acquisitions – so it’s most recent deal with Kraft Heinz, which saw it take on a number of Italian baby food brands, including Plasmon, isn’t a surprise.
What’s the driving force behind the acquisition?
NewPrinces had already bought a sister part of the business back in 2015 – the Ozzano Taro facility, which had previously been a Plasmon factory and continued to manufacture the infant formula until recently.
We can assume the transaction in 2015 was a positive experience and the deal has paid off for the group, given its latest move.
“The business sees an obvious synergy in bringing the two entities back together,” Andrew Ford, equity research analyst at Peel Hunt, told Food Manufacture.
“When they bought this plant [Ozzano Taro], they could see how much capital investment [e.g. improvements made] had gone into it,” he added.
As such, Ford said it’s likely similar investments have been made into these other complementary areas of the business – and this would have appealed to NewPrinces.
Since it acquired the Ozzano Taro plant, it has also injected further investment into the facility – with €90 million of capex over the last decade.
In terms of risk, Ford says it’s fairly minimal: “The integration risk on these assets is relatively small, particularly when we’re talking about ambient – there’s not so much in the way of food control issues [compared to fresh foods].”
He added this is especially true when a business is buying a well-invested venture, which doesn’t require a lot of labour. Instead, the brands will fit nicely into the Princes Group’s existing set up, whilst giving it a decent command of the Italian baby food market (around 30% combined share with Plasmon and Nipiol), with Plasmo expected to grow sales by 3% per annum and improve EBIT margin by 500bp. The deal will also see it land a strong foothold in the speciality sector with the gluten free and low-protein brands it has scooped up.
At the same, NewPrinces isn’t just thinking of the existing synergies between Ozzano and these new additions, but also how it will fit into the wider picture. With NewPrinces having acquired Carrefour Italia in December for around €1 billion, the group is setting itself up to have an entire vertical.
Princes also owns the popular tomato brand, Napolina. This is currently UK focused but the ingredients are grown and canned in Italy, so there is also an opportunity for the business to expand this brand into its domestic market as it steps up its Italian presence.
In terms of risk when it comes to this latest investment, some investors may raise concerns related to fulfilling factory capacity. However, for Princes, because it operates in both brand and private label as well as across geographies, it’s very flexible. This means filling its volumes is less of a worry for the group.
Why did Kraft Heinz sell up?
The key here is the difference between the two players.
Whereas Kraft Heinz has much bigger ‘conglomerate brands’ which it gets involved in manufacturing for, some of its other brands are placed in a ‘second tier’ group, according to Ford.
In other words, they generate a bit less than what the business would want to command for its brand set.
“So it might look, optically, like a bit of a margin drag for someone like Kraft Heinz, but for Princes it’s margin enhancing,” he added.
But the deal could also be the result of the changing of the guard, with Kraft Heinz seeing its new CEO, Steve Cahillane, take the helm this month.
“When you get change in management or people coming into new roles within these big organisations – there’s a lot of things being done very well, but somebody needs to change something,” Ford ventured.
Sometimes this equates to someone looking at where margins are lowering and opting to offload the ‘offending’ assets.
That being said, there has generally been more of a drive towards offloading due to climbing interest rates.
“They’ve [Kraft Heinz] also seen an element – as all parties have – of volume contraction in certain areas of the business,” Ford continued.
If you have a manufacturing base and your volume drops suddenly, it can hit your margin at speed.
“So we’ve seen the bigger guys looking to be more of the brand owner rather than the manufacturing base owner, or they want to have a much smaller manufacturing footprint of their core elements.”
The first many acquisitions...
The operating structure for the business sounds complicated but essentially NewPrinces owns the business, with its subsidiary Princes Italia paying a yearly rent to run the operations. This will see NewPrinces retain a stake in the business, but it also allows Princes Group to keep hold of more capital which it can use to spend on further acquisitions in the future.
Given Princes’ recent acquisition activity, with the Diageo site in Italy also picked up the group in late 2025, Ford anticipates the business to be focusing much more on the central European market when it comes to future acquisitions.
The wider M&A market
The really interesting thing about the acquisition is what it signifies about the wider market F&B acquisition landscape.
As Ford told Food Manufacture - we’re seeing a shift in Europe, with several big companies reducing their manufacturing capacity and offloading some of their ‘lesser’ brands to more ‘strategic players’ (i.e. an owner operator).
Previously, financial institutions had usually been the ones to snap up ‘smaller’ brands – and arguably under invest in them. Now, given the change of interest rate, Ford said we’re seeing private equity firms become less active in this arena.
Instead, operators are coming in not just for the financial reasons (i.e. buying it for cheap and trying to extract value from the asset) but with a mindset to grow the asset and bring it under an umbrella of a bigger organisation.
