Don Thurston Blog

How many Pringles is 2.7 Billion Dollars?

Extra! Extra!, Kellogg purchases the Pringle product line from Procter and Gamble for 2.7 billion dollars. For the record a billion is nine zeros and a trillion is twelve zeros in the United States. Under any circumstances these are big numbers.

So how many Pringles does Kellogg need to sell to generate a return based on profits? One hundred Pringles (chips, that is) sell for $1.50 and therefore 0.015 dollars per Pringle. With a profit margin of 8.0% and a price tag of $2.7 billion, Kellogg is looking at the sale of 2.2 trillion Pringles. That is 220 billion “Super Stack” cylinders.

This transaction is recent in a long line of deals in the confectionery, food, beverage, over-counter pharmaceuticals, and snack-food industries. Within these industries many of the same assets have moved at least once. Bick’s Pickles provides a good example. Beginning in 1960 companies such as Robin Hood Flour, Kraft, International Multifoods and Smuckers have all owned Bick’s.

So what is with this high frequency of transactions? The Investor Relations people will provide explanations thusly: “moving into growth markets to take advantage of shifting demographics , rationalizing our product lines, focusing on our core business, realizing marketing efficiencies, exiting mature products and to reinvest the proceeds in higher growth products and markets ” and so on.

Perhaps there are less obvious reasons. There is a possibility that many deals happen because they can and because of habit. Expressed another way the perceived dynamics of any system cause actions that while seemingly based on logic are actually based on tradition and standard ways of thinking. The constant rotation of oil and gas assets and trading hockey players have similar characteristics.

This concept of habit versus fresh thinking is explored at The Beer Game.

The fundamentals of the deals are less significant than the deals themselves. Enjoy your Pringles.

Thanks for reading!

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