General Mills' net sales in fiscal 2017 (ended May 28, 2017) declined by 5.7%, year on year to US$15.6 billion, and flat sales growth is expected for fiscal 2018. It is struggling with low demand for processed sugary foodstuffs and the deal is expected to boost its sales performance within two years.
Founded in 2002, Blue Buffalo generates over US$1 billion in sales annually, thanks to a strong demand for premium, natural pet food. Its share price has been growing steadily for the past few years and reached US$40 on February 23 after the announcement, up from US$34.12 a day earlier, while General Mills' declined to US$52.98 from US$54.95. Blue Buffalo had a 6.1% share of the US pet food market in 2016, according to Euromonitor.
Acquiring pet food companies has been a trend among F&B firms for quite some time as they seek to diversify product portfolios and to increase their shares of the US$30 billion US pet food market. In January, Cargill Inc bought the maker of Black Gold dog food Pro-Pet for an undisclosed amount.