Diane Pearse, CEO of Hickory Farms, has a prevailing consideration when it comes to selecting M&A targets: brand.
“Our overall vision for the company is to be the best retailer or the best retail brand in the food gifting space,” Pearse says.
Hickory Farms doesn’t manufacture product. Instead, it curates, puts things together, in an effort to make gifting easy for customers in what is a $20 billion U.S. marketplace the company plays in. That position and vision both inform the company’s approach to M&A.
“When you want to be the best retailer in that space or the best retail brand, you can’t just focus on one category,” she says.
The company, mainly known for meat and cheese, needed to broaden its offerings to achieve its vision. So it made a couple acquisition in the past four years, which Pearse says fall into the category of product expansion rather than brand acquisitions.
One of these acquisitions was a business that sold popcorn tins at retail, typically for holiday occasions. The other acquisition was a wine gift basket company that sold primarily online to higher-end consumers.
“So it was great to actually have two different acquisitions that book-ended the market and put us in categories that we didn’t really have exposure to at this point in time,” she says.
Since its brand is essentially its biggest asset, Hickory Farms had a very deliberate focus when the company went out in search of an M&A target.
“We do not want to be a house of brands, but rather a branded house,” she says.
Hickory Farms research says it’s better not to dilute its strong brand, but rather expand in consumers’ minds what that brand stands for. Its research says consumers trust the company for its quality, so it’s looking for opportunities in categories of food gifting that it does not participate in currently. It’s also looking for companies without an established brand so that Hickory Farms doesn’t need to continue to nurture it. Instead, it can bring the company in as another category.
Alignment, in these situations, between buyer and seller goals is as important as culture when choosing an acquisition target. They’re the two things that will lead either to success or failure in a deal.
“We were very careful in both acquisitions to make sure there was alignment in how we thought about the customer and how we thought about the category, and alignment about how we work because we are a lean organization,” she says. “And when you’re going after smaller targets they are usually lean as well. And if you’re not aligned on the costs of integration, they can actually go through the roof, or the actual success of the organization can go through the roof.”
Pearse was featured at the Chicago Smart Business Dealmakers Conference talking more about M&A as well as the current and future state of the business. Hit play above for the full conversation.
