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Mars-Kellanova Deal Threatens Consumers with Inflation and Fewer Choices

Candy giant Mars announced [[link removed]] plans last week to acquire Kellanova, a recently [[link removed]] 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 [[link removed]] in 2015.

Mars executives say [[link removed]] 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 [[link removed]] prices [[link removed]].

“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 [[link removed]] 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 [[link removed]] 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 [[link removed]] and Nature’s Bakery fig bars [[link removed]], 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 [[link removed]], gum [[link removed]], and pet food [[link removed]]. 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 [[link removed]] 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 [[link removed]] and promotional fees [[link removed]] to claim the best shelf space. Big brands also provide retailers with market intelligence and data to become “ category captains [[link removed]]” 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 [[link removed]] 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% [[link removed]] of Mars’s products and 78% [[link removed]] 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 [[link removed]] 60% of the U.S. adult diet and nearly 70% of U.S. children’s diets, despite a growing body of evidence [[link removed]] that their consumption is linked to poor health outcomes.

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What We're Reading

JAB rolled up the coffee industry, buying brands such as Keurig, Panera, Peet’s Coffee, and Pret A Manger. Turns out this monopolization didn’t pay off for the wealthy family behind JAB but primarily enriched two high-level JAB financial advisors. ( Bloomberg [[link removed]])

Cairo, Illinois used government support to re-open the town’s last grocery store. But the store is struggling to stay open. Renewed antitrust enforcement, including dusting off the Robinson Patman Act, could give independent stores in food deserts a fighting chance, writes ProPublica. ( ProPublica [[link removed]])

USDA’s Packers and Stockyards Division is investigating Tyson Foods, Investigate Midwest confirmed with a USDA employee and contract growers. The nature of the investigation is unknown, but Tyson has been criticized [[link removed]] for closing nine meatpacking plants across the country. ( Investigate Midwest [[link removed]])

Kamala Harris announced [[link removed]] plans to target grocery price gouging and profiteering if elected. ( Politico [[link removed]])

About the Open Markets Institute

Our team of reporters, lawyers, and economists works to revive competition policy to build stronger democracies, more just and equitable societies, more innovative and sustainable economies, and a more secure and peaceful world.

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Written by Claire Kelloway

Edited by Phil Longman and Austin Ahlman

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