Mars-Kellanova Deal Threatens Consumers with Inflation and Fewer Choices
Candy giant Mars announced plans last week to acquire Kellanova, a recently spun-off division of Kellogg’s that owns brands such as Eggo, Pringles, Cheezits, and Poptarts. The $36 billion takeover is the most expensive deal so far this year, across the economy. It would be the largest packaged food company combination since Kraft and Heinz merged in 2015.
Mars executives say that this deal will improve product innovation and choices for consumers. Critics say it will do the opposite. Further concentration will give dominant food companies more resources and bargaining clout to buy prime shelf space and marginalize smaller competitors. Less competition also means food companies have more power to raise prices.
“American grocery shoppers are suffering from high prices and fewer choices on the shelves — Mars’ Kellanova acquisition would only make it worse,” says Amanda Starbuck, research director for Food & Water Watch, which tracks grocery and food company consolidation.
The merger would directly eliminate competition in the snack bar market where Mars and Kellanova compete head-to-head. In 2021, Mars and Kellogg controlled 10.5% and 17.2% of the market for snack bars, respectively. Kellanova’s portfolio includes Nutrigrain, RXBar, and Rice Krispie bars, so this merger would make Mars the industry leader for snack bars with nearly 28% of the market. Mars’ portfolio includes the KIND bar company and Nature’s Bakery fig bars, both of which it acquired in 2020.
The merger will also reduce competition indirectly by transforming Mars into a veritable global packaged food conglomerate on par with PepsiCo and Unilever and larger than General Mills, KraftHeinz, or Mondelez. Currently, Mars dominates in candy, gum, and pet food. Adding Kellanova’s breakfast and salty snack brands significantly expands Mars’ footprint from the checkout aisle to the center of the store.
With more scale and more product offerings, Mars also gains more resources and bargaining power to place its whole family of products in grocery and convenience stores, edging out smaller competitors. Big brands have bigger budgets to pay grocers slotting fees and promotional fees to claim the best shelf space. Big brands also provide retailers with market intelligence and data to become “category captains” and determine where their competitors sit on the shelf. “Big grocers can more efficiently work with fewer, bigger brands that they can pump for more revenue and lean on for more data,” writes Errol Schweizer, a former vice president of grocery for Whole Foods. “Category concentration on shelf is typically self-reinforcing.”
Smaller competitors cannot provide retailers as much money for slotting fees and have trouble getting even undesirable shelf space. To get national distribution and prime placement, most upstarts court an acquisition by a giant like Mars. The snack industry knows that it’s suffering from an innovation problem and losing sales as consumers demand healthier and more sustainable products. However, unchecked mergers ensure that the same companies stay on top and continue to grow by buying innovators.
More market power for Mars will make it more difficult for millions of Americans to find healthier, less processed food products for sale. Companies like Mars talk a big game about offering healthier options, but they make most of their money peddling highly processed products high in sugars, saturated fats, salt, and additives. An assessment of Mars and Kellogg’s products in 2021 by the Access to Nutrition Initiative found that 74% of Mars’s products and 78% of Kellogg’s products were unhealthy. As companies like Mars take over more of the market, it is no surprise that so-called “ultra-processed foods” make up nearly 60% of the U.S. adult diet and nearly 70% of U.S. children’s diets, despite a growing body of evidence that their consumption is linked to poor health outcomes.
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