Hormel Foods announced Tuesday an agreement to buy Columbus Manufacturing, known for its salami and soppressata, from a Chicago-based private equity firm for $850 million.
That’s almost four times the reported $213 million that Arbor Investments paid for Columbus in 2012, when it acquired the premium deli meat company from Endeavour Capital.
Hormel’s acquisition of Columbus — and the sizable return on investment for Arbor — reflects Big Food’s insatiable appetite for smaller, more premium food companies these days. Simply put, it’s easier to buy products that are marketed as natural or premium or authentic — all popular industry buzzwords these days — than it is to create them.
Annual sales for Columbus are about $300 million with an expected growth rate of more than 5 percent, Minnesota-based Hormel said Tuesday.
Columbus will join other brands in the Hormel portfolio such as Spam, Jennie-O, Applegate and DiLusso.
In a conference call with investors Tuesday morning, Hormel executives touted the benefits of adding Columbus to its deli meat portfolio, saying the “craft” and “artisanal” meats would appeal to millennial consumers and possibly help Hormel expand its presence in club and natural food stores, as well as e-commerce channels. Hormel CEO Jim Snee called the acquisition a “grand slam” for the company.
“The acquisition of Columbus allows us to change the narrative in a meaningful way,” Snee said.
Since acquiring Columbus in 2012, Arbor invested about $61 million into plants and equipment for the California meat company and overhauled the senior management team, said Gregory Purcell, co-founder and CEO of the private equity group. Columbus is perfectly positioned for today’s consumers who increasingly prefer better quality products, Purcell said.
“Most people in the food business regard Columbus as the Gucci of premium deli meat,” Purcell said.
In August, Hormel also announced the $425 million acquisition of Fontanini Italian Meats and Sausages, a Chicago-area food service business.
Earlier this month, Kellogg Co. announced its $600 million acquisition of Chicago-based RXBar, a protein bar company. Just weeks before that, Chicago-based Conagra Brands said it would buy the maker of Angie’s Boomchickapop ready-to-eat popcorn for $250 million.