The Hidden Expense in Big Food: MAHA
Ferrero's Acquisition of Kellogg Amid Health Controversies
In late June, executives from the Italian food giant Ferrero traveled across the United States, visiting cereal factories that were at the center of a growing public health debate. This move came as Robert F. Kennedy Jr., President Trump’s top health official, accused artificial dyes in WK Kellogg’s Froot Loops of poisoning American children. The cereal, which has been a staple in grocery stores since 1963, became a focal point for Kennedy’s “Make America Healthy Again” (MAHA) agenda.
Ferrero had initially offered to acquire Kellogg, a company that was struggling financially. However, the deal involved navigating a complex political landscape. Kennedy’s campaign against processed foods and additives made it a risky proposition. After weighing these challenges, Ferrero reduced its offer by about $75 million, ultimately agreeing to buy the company for around $3.1 billion.
The MAHA agenda has created uncertainty for big food companies already facing shifting consumer preferences. Many states have adopted similar policies, passing laws to restrict certain food sales and investigating health claims. Food industry leaders are trying to understand how much of Kennedy’s agenda will materialize and what impact it could have on their profits. Balancing his push for healthier food with the need to produce products that consumers want is a major challenge.
Some companies have formed special teams to track ingredients under scrutiny and assess potential changes. Executives compare dealing with MAHA to battling the mythical Hydra—cutting off one head only to see two more grow in its place. Darren O’Brien, chief corporate and government affairs officer for Mondelez, noted that every day brings new proposals.
A string of companies, including Kraft Heinz, General Mills, and Nestlé, pledged to remove artificial dyes from U.S. products. Mars announced plans to offer some M&M’s and Skittles without dyes next year. The Consumer Brands Association encouraged food makers to eliminate dyes by the end of 2027.
Old-line brands like Lunchables, Twinkies, and Trix have struggled long before Kennedy’s arrival in Washington. Sales have declined for many big food companies that raised prices in recent years. Rising costs, increased use of weight-loss drugs, and heightened scrutiny over ultraprocessed foods are compounding challenges. An S&P index tracking packaged food and meat companies has fallen about 16% over the past year, while the overall market gained about 14%.
Food companies are making significant moves to adapt. Kraft Heinz is preparing to split into two companies, while Conagra and General Mills have shed legacy brands. At least five major food companies have announced CEO replacements this year, setting up the highest C-suite turnover in at least a decade, according to JPMorgan Chase.
An HHS spokesman said that Kennedy values ongoing engagement with the food industry and is encouraged by steps many companies are taking to improve nutrition and public health.
The Rise and Fall of Kellogg
Since the early 20th century, Kellogg has been synonymous with Battle Creek, also known as Cereal City. Its sprawling factory has spread the aroma of toasted grain throughout the town. Founded in 1906, Kellogg pioneered vitamin-fortified cereal and produced K-rations for U.S. troops during World War II. Mascots like Tony the Tiger and Toucan Sam became household names.
However, Americans have lost interest in breakfast cereal, causing problems for Kellogg. The company expanded over the years, adding snack brands such as Pop Tarts, Pringles, and Cheez-Its. In 2023, Kellogg separated its North American cereal business from snacks, renaming it WK Kellogg. Since then, it has posted year-over-year sales declines in every quarter.
Kennedy targeted Froot Loops as part of his MAHA campaign, criticizing the cereal giant for using artificial dyes in the U.S. while selling naturally colored versions in Canada. Vani Hari, a food activist known as the Food Babe, led protests outside Kellogg’s headquarters, demanding the removal of artificial dyes.
Kellogg and other food companies maintain that artificial dyes are safe and regulated. The company stated that most of its sales come from cereals without artificial colors and that international variations reflect different consumer preferences. A Kellogg spokeswoman emphasized the company’s commitment to health and wellness, noting changes to suit evolving consumer tastes.
For a product like Froot Loops, removing artificial dyes would be complex. In Canada, the dough uses coloring derived from carrots, watermelon, and blueberries. To switch to natural dyes in the U.S., Kellogg would need to secure large quantities of new ingredients and retool parts of its plants.
Navigating the MAHA Agenda
Food industry lobbyists began defending the sector on Capitol Hill after Trump’s re-election. They focused on lawmakers who might be sympathetic to the MAHA agenda, emphasizing the industry’s role in producing safe, convenient, and affordable food. The Consumer Brands Association (CBA) called for policies grounded in science and common sense.
The CBA set up a meeting between Kennedy and major food company CEOs, including Kellogg’s Pilnick. During the meeting, Kennedy made it clear that artificial dyes must go. Pilnick posed for pictures with Kennedy, signaling a shift in the company’s stance.
Inside the CBA, food company executives were divided on how to navigate the situation. Some went through multiple “stages of grief” before deciding to remove artificial dyes, while others resisted any retreat. Later, the CBA proposed phasing out artificial dyes and asked for the administration’s help on issues like natural dyes and tariffs.
Kennedy has not addressed concerns about state laws with varying requirements. Instead, he publicly thanked governors who have tightened food regulation, crediting them with giving HHS more leverage over food companies.
For Kellogg, the prospect of removing artificial dyes adds to financial pressures. Cereal, once a mainstay of American breakfast tables, is in decline. Over the past decade, consumers have shifted toward yogurt, bars, and shakes.
In the 12 months ending Aug. 9, U.S. consumers spent $197 million less on ready-to-eat cereal than in the previous year. In a 2023 survey, 39% of American adults reported eating heavily sweetened cold cereal, but that figure fell to 31% in the following year.
Cereal’s decline helped spur Kellogg’s decision to separate its cereal business from its larger and faster-growing snacks division, named Kellanova. This effectively put a for-sale sign on the cereal business.
Ferrero, known for brands like Nutella and Tic Tacs, approached Kellogg in April. The two companies had done business before, with Ferrero buying Kellogg’s Keebler cookie business in 2019. The family-owned company has been acquiring other U.S. brands, including Butterfinger and Blue Bunny.
Ferrero believes the cereal aisle lacks innovation, an area the company considers a strength. Over time, Kellogg’s posture on artificial dyes changed. In April, Kellogg announced plans to remove dyes from products made for schools and work with federal officials to eventually remove them from all products.
Ferrero executives determined they could handle the MAHA agenda. Costs to reformulate Kellogg products appeared manageable, and they felt reassured by their experience in Europe. They also don’t see Kellogg’s problems as unique—many in the food industry face similar pressures.
A private-equity firm also bid for Kellogg. On July 10, Kellogg’s board agreed to sell the company to Ferrero for roughly $3 billion. Later that day, Pilnick addressed employees, stating that planned investments in the local cereal plant would continue.
A week later, Kellogg announced it would remove artificial dyes from all its products by the end of 2027. “Froot Loops is finally following its nose—toward common sense,” Kennedy said on X. He called on more companies to follow suit.
