It's not meat and potatoes, but poultry and potatoes and some dairy foods at Michael Foods Group. The group operates through Michael Foods, Inc., one of the top US producers and distributors of value-added egg products (frozen, liquid, pre-cooked, and dried). Its Egg Products division, comprised of four subsidiaries, supplies egg products to food service, retail grocery, and food ingredient customers. The group's business includes Crystal Farms, a distributor of cheese, butter, and other dairy case items to US groceries, and Northern Star, a supplier of refrigerated potato products to North American food service operators and grocery stores. The company has agreed to be acquired by cereal maker Post Holdings.
Michael Foods is owned by GS Capital Partners and Thomas H. Lee Partners, private equity firms that own 74% and 21% of the company, respectively. In April 2014, they agreed to sell Michael Foods to Post Holdings, the maker of Raisin Bran and Honey Bunches of Oats, for $2.45 billion. The sale is expected to close by mid-2014. (Michael's private equity owners bought the company in 2010 for $1.7 billion.)
Minnesota-based Michael Foods Group operates 26 facilities in Iowa, Minnesota, Nebraska, Nevada, New Jersey, Pennsylvania, and Wisconsin, and in Manitoba and Ontario, Canada.
Sales and Marketing
Michael's major customers include leading food service distributors, restaurants, and grocery chains. Sales to food service giants Sysco Corp. and US Foods represented 18% and 13% of 2013 sales, respectively. The #1 and #2 food service companies in the US, Sysco and US Foods have agreed to merge. The effect of their combination on Michael's business remains to be seen.
Michael Foods Group reported $1.95 billion in sales in 2013, an increase of 5% versus 2012. The uptick in sales reflected growth in the company's eff and refrigerated potato product business segments, offsetting a decline in cheese and other dairy-case products. (The company's Simply Potatoes and AllWhites Egg Whites brands posted particularly strong growth.) Profits jumped 67% in 2013 versus 2012 due to higher revenue and lower expenses.
Michael Foods, which says it does not expect to cut its workforce as a result of its sale to Post, will continue to operate independently. The company expects to benefit from Post's portfolio management approach and from its continuing focus on breakfast and expanding the consumption of eggs to other parts of the day.
Michael Foods is setting itself apart from the pack of egg producers by focusing on valued-added, processed food products that keep pace with food trends. Indeed, about two-thirds of the egg products division's sales come from value-added products. Its position provides some flexibility for passing through higher commodity costs and offsetting volume declines by tweaking its pricing. It may also help Michael Foods diversify its customer base. Michael Foods is vertically integrated with more than 25% of the egg division's needs satisfied by production from its own hens.
The company has a 50% share in a joint venture that operates Lang Fang MK Food Company, a Chinese egg products business. Michael Foods also looks to acquisitions to build its business.
Mergers and Acquisitions
In June 2013 Michael Foods acquired Primera Foods Corp., an egg products processing company operating in the Midwest, for $35.7 million. By adding Primera to its own egg products operation, Michael Foods expects to realize significant synergies and cost savings.