Hershey to acquire Dot's Pretzels as part of $1.2B deal; employees, North Dakota headquarters to remain in place
Dorothy "Dot" Henke founded the business in 2012 from her kitchen in Velva, N.D. Today, it has expanded into the fastest growing pretzel brand in the nation and will become an important acquisition in the famed Pennsylvania chocolate company's quest to become a salty-sweet snacking superpower.
VELVA, N.D. — The famous Dot, whose name has become synonymous with zesty, buttery pretzels, has now signed on the dotted line.
The Hershey Co. announced Wednesday, Nov. 10, it has entered into an agreement to acquire Dot's Homestyle Pretzels , along with one of Dot's manufacturing partners, for $1.2 billion, according to MarketWatch.com and The Wall Street Journal.
"While we keep secret our spice blend, we like to think the most special ingredient in our pretzels comes not from a jar but from who we are," founder Dorothy "Dot" Henke told The Forum. "From our beginnings in North Dakota in my home kitchen, Dot’s Pretzels has always reflected the values of our home: We work hard, love our friends and neighbors and come together to make it through the long, cold winters.”
In keeping with the excellent reputation that Dorothy and husband, Randy, built with the zesty pretzels, Hershey's will continue to package her special recipe under the Dot's name.
"The Dot's name and history are very much a part of the success of the company and highly valued by Hershey's," Jeff Beckman, spokesperson for Hershey, told The Forum. "Dot will always be the founder of the brand and will be a great ambassador for it into the future."
Likewise, Beckman anticipates that the first Dot's facility — a renovated building in Velva, North Dakota, where 55 people work — "will continue to operate 'business as usual' for the foreseeable future."
"The leadership team of Dot's Pretzels are one of the company's strongest assets and will continue in their roles following a close of the deal," he added.
This latest acquisition will help the Pennsylvania-based company continue to diversify its product line of chocolate and candy to also include salty snacks. Hershey CEO Michele Buck said consumers view pretzels as a healthier snack, like popcorn, which they feel better about eating.
"As the fastest growing U.S. pretzel brand, Dot's Pretzels would further accelerate our success in the permissible salty snack category, along with our successful SkinnyPop and Pirate's Booty brands," Buck said. "With a unique range of bold, distinctive seasonings and a flavorful crunch that creates a premium pretzel experience for consumers, Dot's Pretzels stand apart from all other products in the pretzel category and represents 55% of the pretzel category's growth during the past year."
The acquisition of the Dot's and Pretzel Inc. properties also will help the company expand its production capabilities domestically, which will make it easier to control supply-chain bottlenecks and other COVID-related disruptions, according to the Wall Street Journal.
"Working in the global supply chain right now is incredibly difficult," Buck said. "The ability to have a facility in house just reduces one level of that complexity."
The party mix that started it all
Henke said she was first inspired to give a new twist to pretzels after she attended a wedding reception in Max, North Dakota, more than a decade ago. She sampled the Chex party mix, and — although she found it a tad spicy — she liked the addition of the buttery spindle pretzels.
Henke had retired from her financial services job, so she had some extra time to experiment with her own recipe. She bought packets of spindle pretzels and started trying out different spice mixes in her kitchen in Velva. When she found the perfect blend — an intriguing buttery, garlicky snack, with hints of Parmesan and a slightly peppery afterbite — she started bringing the special pretzels to family parties.
In 2011, as the Henkes were wintering in their home in Arizona, a friend asked her to make a few packs of her special pretzels to give as client gifts., according to a 2018 Minneapolis Star Tribune story.
"She handed them out and her phone started ringing off the hook," Henke said in a video on the company's website.
The Henkes began promoting their product through Pride of Dakota shows and other trade shows. Wherever they went, the pretzel championed as "a small-town recipe" with "big time flavor" was a hit, Henke told attendees of the 1 Million Cups Fargo event in 2019.
The Henkes eventually opened a production facility in their hometown of Velva. Today, they also run three other facilities in Lenexa, Kansas; Edgerton, Kansas; and Goodyear, Arizona.
These facilities don't make pretzels, but they do season and package them. The company purchases pretzel twists, which are then coated in oil and a blend of seasonings, baked, cooled and repackaged.
In late 2020, Dot's entered into an agreement to lease 2,646 square feet of space in the RDO Tower in downtown Fargo. That office "will continue to provide support services (for Dot's) for the foreseeable future," Beckman said.
Today, Dot’s Pretzels is the fastest-growing U.S. pretzel brand among brands with more than $10 million in annual U.S. retail sales, according to Hershey. The company said Dot’s represented 55% of growth in the pretzel category over the past year.
In a related agreement, Hershey also made a deal to acquire Pretzels Inc. from an affiliate of Peak Rock Capital, a private investment firm with multiple investments in the food and beverage industry.
Pretzels Inc. co-manufactures pretzels for Dot's and other customers. The Bluffton, Indiana-based company operates three manufacturing locations in Indiana and Kansas.
When the transactions are completed, Hershey's will acquire Pretzels Inc.'s three manufacturing locations, along with Dot's four pretzel-seasoning locations.
“Pretzels Inc. will help us expand Hershey’s snacking and production capabilities while keeping the special connection to Dot’s,” Buck said. “It will be important as we continue to grow this already fast-growing brand and create new products in the broader pretzel category."
Dot's and Pretzels Inc. had combined sales of $275 million over the past year, according to the Hershey's release. The sale is expected to close by the end of this year.