Post Holdings said it plans to spend up to $110 million to expand its cereal production capacity at a Nevada facility that serves the West Coast.
The St. Louis company behind Honey Bunches of Oats, Pebbles and Great Grains, said the proposed expansion will provide the company with additional production volume, address capacity constraints to better meet consumer demand, and reduce transportation costs to serve West Coast customers more efficiently.
The Sparks, Nevada facility, which will create as many as 40 new jobs, is projected to be completed in 2025.
During the company’s first-quarter earnings call in February, CEO Robert Vitale said consumption for its U.S. branded cereal products “continues to run ahead of pre-COVID levels by nearly 2%.” He noted that its market share was just under 20%. A bright spot for Post continues to be Pebbles.
The popular Pebbles has been an anomaly in an otherwise downtrodden cereal market, grabbing the most market share out of any brand in 2021 and recording eight straight years of growth, according to data provided by Post earlier this year.
Post Consumer Brands, which also houses Post’s Better Oats oatmeal, Malt-O-Meal as well as its cereals among other offerings, has nine owned manufacturing facilities in North Carolina, Michigan, Arkansas, Utah, Ohio, Nevada, Ontario and two in Minnesota. Its Utah and North Carolina locations are the only new cereal production facilities it has built since 2000, the company said on its website.
The plant addition appears to be the newest construction project for Post. Last year, it announced plans to spend $86 million to construct a new 215,000-square-foot manufacturing facility in West Jefferson, Ohio. At the time, the company said the facility will likely produce protein drinks for BellRing Brands. The company divested the 80% of its ownership in BellRing in March to Post shareholders.
Cereal as a whole has been among the beneficiaries during the pandemic as people spend more time eating at home. The demand is expected to continue. Statista estimated that 283 million Americans consumed cold breakfast cereals in 2020. This figure is projected to increase to 290 million in 2024, the data showed.
The plant expansion is as much a bet that demand for its portfolio of cereals will continue as it is to increase efficiencies throughout its supply chain, saving money in the process.
With 34.4 million people living on the West Coast, making up roughly 11% of the U.S. population, according to U.S. Census data, Post has a large market base there. The CPG no doubt wants to make sure it can better meet changing consumer appetites and compete with behemoths like General Mills and Kellogg.
The food sector has been undergoing a rapid pace of expansion as companies such as Post increase output to set the stage for future demand.
Nestlé plans to spend $675 million on a facility in Arizona to make creamers for its Coffee mate, Coffee mate Natural Bliss and Starbucks brands.
Mondelēz International has announced it would invest $122.5 million over three years to boost capacity at its Richmond, Virginia, location where it makes Oreos, and J.M. Smucker committed $1.1 billion to build a new manufacturing facility and distribution center in Alabama to produce its Smucker’s Uncrustables sandwich.
And eight months after announcing a 70,000-square-foot expansion to its manufacturing center in Bloomington, Illinois, Ferrero announced this week an investment of up to $214.4 million to further expand the still-under-construction plant.