Post Holdings Inc (NYSE:POST) looks better positioned after buying the small health food company Attune RTD (PINK:AURT). Attune offers a variety of gluten free foods that include several types of cereal and snack bars, as well as other health food products. Shoppers who have allergies to wheat and other grains go out of their way to find gluten free foods. Post could gain loyal customers and boost its margins with this move. The deal could also boost Post's overall health brand, which might help the company market Grape Nuts, Post Raisin Bran, and other health oriented cereals. The Attune acquisition also makes other companies that invested in gluten free products look stronger right now.
Post could achieve noticeable sales growth from its Attune buy even without making additional investments into the health food company. Joe Dwyer, at the St. Louis Business Journal, stated that in 2011, Attune achieved sales of $15 million. The overall health food market and the gluten free market have grown in recent years, so Attune probably achieved an even higher annual sales figure before the acquisition announcement in January 2013. A Packaged Factsreport summary estimated a 28% CAGR for the gluten free market between 2008 and 2012. Attune's small size likely helped it grow in 2012, as well.
Post isn't that big itself, and the cereal maker reported weaker sales in 2012, so this sales boost matters. Post reported sales of $968 million in fiscal 2011, which shrank to $959 million in fiscal 2012. A $9 million sales decline resulted in 1% lower overall sales for Post. Even if the gluten free market's growth rate slows down somewhat in 2013, Attune could still be big enough to help Post's sales in 2013. This growth opportunity appeals to Post competitors as well.
The former Smart Balance, Boulder Brands Inc (NASDAQ:BDBD) also plans to use the gluten free market to help power its future growth, supported by the acquisition of Udi's last year. In a January 21, 2013 press release, Udi's announced that it had served gluten free foods to movie stars and other celebrities at the Sundance Film Festival. Celebrity appeal could raise the profile of gluten free foods and help every brand in the sector, because many people who have gluten allergies don't know they're allergic to gluten, so Post might also gain from Udi's advertising efforts.
Post's decision shows that Boulder Brands and other small, specialized companies can expect increased competition from traditional cereal makers. Traditional cereal companies can also extend their established brands into the gluten free market. Kellogg Company (NYSE:K)'s extended its established Rice Krispies brand to make gluten free Rice Krispies. Kris Patton, at General Mills, Inc. (NYSE:GIS), explained that General Mills entered the market with gluten free Chex cereal, and now offers other gluten free products including Bisquick pancake mix. Gluten free versions of established cereal brands don't necessarily share other common health food draws such as organic ingredients, so health food companies have some protection from competition.