Hormel sells CytoSport, maker of Muscle Milk, to Pepsi

Hormel Foods Corp. said Tuesday it is selling its CytoSport business, including Muscle Milk products, to PepsiCo.

The Austin-based food company offered few details, but said it will discuss the sale Thursday morning when it reports its latest quarterly results.

Terms of the deal were not disclosed. Hormel said it is expected to close in the next two months.

The announcement comes the evening before PepsiCo is scheduled to deliver a business update at the Consumer Analyst Group of New York's annual conference in Boca Raton, Fla.

"PepsiCo has deep expertise and experience in the sports nutrition category and has been a long-standing distribution partner for CytoSport and the Muscle Milk brand, which puts them in a strong position to grow this dynamic business," Jim Snee, Hormel's chief executive, said in a statement. "We look forward to working with PepsiCo to ensure a smooth transition for our team members, suppliers, customers and consumers."

Hormel bought CytoSport in 2014 for $450 million as another entry point into non-meat protein sources, a growing consumer market.

CytoSport, based in Walnut Creek, Calif., got its start marketing its protein-packed powders to weightlifters before developing ready-to-drink bottled products sold in groceries and other stores.

Under Hormel's ownership, it rolled out a line of plant-based protein drinks and snack bars called Evolve. In 2016, a contract manufacturer that bottled Muscle Milk products initiated a product recall over concern that a packaging defect could cause the product to spoil in transit. That recall led to a loss of retail shelf space that had a ripple effect on the business' bottom line.

Throughout 2018, Hormel reported disappointing financial performance in its CytoSport line. Executives blamed several factors, including aggressive competitors and a loss of distribution at convenience stores.

During the company's last earnings report three months ago, Snee told investors, "CytoSport had a disappointing year with declines in powder and single serve ready-to-drink product lines. We are taking appropriate actions in both businesses and expect they will return to growth in 2019."

Kristen Leigh Painter • 612-673-4767