One of the oldest and most recognizable names in the food industry, Post cereals, is getting a new start as a stand-alone public company next month.
Along with its independence comes a new strategy, which was outlined in a regulatory filing Friday. Changes will include a planned shake-up of Post's marketing and pricing and a new base of operations at 2503 South Hanley Road in Brentwood.
St. Louis-based Ralcorp Holdings acquired the Post cereals business from Kraft Foods in 2008 for $2.6 billion. Post's brands include Honey Bunches of Oats, the third-largest ready-to-eat cereal in the U.S. based on revenue; Raisin Bran; and Pebbles.
At the time of the purchase, Ralcorp heralded the Post acquisition as a way to enhance its private label, or store brand, cereal offerings. In addition to cereal, Ralcorp's private label foods include pasta, nutritional bars, crackers and frozen bakery products.
But the acquisition apparently didn't live up to Ralcorp's expectations. Under Ralcorp's ownership, Post's revenue declined and its market share eroded. Post's net sales dropped from $1.1 billion in fiscal 2009 to $968.2 million in 2011, and Post swung from a $101.1 million profit in 2009 to a $361 million loss in 2011.
Post brands under Ralcorp's ownership saw market share drop from 12.2 percent in 2009 to 11.2 percent in November 2011.
A Ralcorp spokesperson declined to comment for this story. But in its regulatory filing detailing its separation plans, Post attributed the decline to switching from an in-house sales force under Kraft's ownership to a broker sales strategy under Ralcorp.
"We believe this resulted in a less focused sales effort as well as a loss in terms of general retail presence and its resulting scale benefits," Post said in the filing.
Additionally, Post said its trade spending became "erratic and lacked measurement discipline" after switching from Kraft's proprietary trade spending tools.
In July, St. Louis-based Ralcorp announced its plans to spin off Post as a separate publicly traded company and refocus on its private label offerings. Ralcorp has beefed up its private label business in recent years with multiple acquisitions, including its $545 million purchase of the North American refrigerated dough business from Sara Lee in October.
The Post spinoff is expected to be completed by the end of January, and the new company will trade under the ticker symbol POST. Ralcorp will receive $900 million from Post in the separation and will own no more than 20 percent of Post's common stock. Ralcorp plans to use the proceeds to reduce debt, fund acquisitions and pursue share repurchases.
After the spinoff is completed, Post says it will follow a plan to reverse market share erosion by focusing its sales efforts on its largest customers, reorganizing its marketing department to put business leaders in charge of each brand, increasing its use of social media, and retooling its merchandising and trade spending efforts.
Post also will review its pricing strategies for its brands, which may result in lower costs for consumers. The company noted that since 2008, Post's average prices for its ready-to-eat cereals rose 16 percent versus an average 7 percent increase for the category. In the same period, Post's advertising and consumer spending support declined 6 percent. "We believe this resulted in an unfavorable shift in consumer value perception and contributed to the decline in market share," Post said in the filing.
However, competition in the cereal market will remain fierce, putting continued pressure on Ralcorp and Post, analysts say. "Branded firms such as General Mills and Kellogg are prioritizing investments behind product innovation and marketing that resonate with consumers," Morningstar analyst Erin Lash wrote in a recent analyst report.
Leading the new Post Holdings company will be chief executive Bill Stiritz, who currently is chairman of Ralcorp. Post also tapped Terence Block, the longtime president of Nestle Purina PetCare's North American pet food business in St. Louis, as its president and chief operating officer.
Post's beginnings date to 1895, when C.W. Post created a cereal product in Battle Creek, Mich. Two years later, Post began selling Grape-Nuts cereal.
Post's ownership has changed hands many times over the last century. The company, under the name General Foods Corp., was acquired by Philip Morris in 1985 and sold to Kraft to 1989.
