What Buying Pasta Sauce Reminded Me About M&A - Why Companies Buy Sauce Instead of Recipes.
Source: Noisey
Standing in the grocery store, staring at a shelf of pasta sauce, I had a small but familiar realization.
I could make this myself. Buy tomatoes. Experiment with spices. Burn a few batches. Learn what works, what doesn’t, and slowly refine the recipe.
Or I could just buy the sauce.
Not because I can’t cook - but because someone else has already figured out how to make it well, consistently, and at scale.
That simple trade-off mirrors a much more consequential one companies face when deciding whether to build, partner, or acquire.
This piece explores the idea through:
Ingredients are inputs. Sauce is a bundled capability.
The Three Ways Companies Get Capabilities
Buying Know-How in Foreign Markets
When building internally doesn't work: Target’s expansion into Canada
The risks of buying the sauce (when M&A backfires)
I: Ingredients are inputs. Sauce is a bundled capability.
A jar of sauce embeds:
recipes
process
trial and error
taste calibration
time
You’re not paying for tomatoes. You’re paying for everything it took to make those tomatoes reliably good.
Companies don’t acquire ingredients. They acquire outcomes - and the learning embedded in them.
This distinction matters more as businesses scale, expand, or cross borders.
II: The Three Ways Companies Get Capabilities
When companies want to enter a new product, market, or geography, they generally have three options.
Build internally
This is the “make the sauce” route. Full control, slower learning, lower upfront cost, higher execution risk. It works best when time is abundant and mistakes are cheap.
Partner or JV
Shared expertise, partial control, and shared risk - but also coordination costs and blurred accountability. Effective when incentives stay aligned and learning is mutual.
Acquire
Higher upfront cost, faster access to embedded know-how. Often chosen when time, uncertainty, or execution risk matter more than capital.
This is where M&A stops being about scale and starts being about capability transfer.
III: Buying Know-How in Foreign Markets
Foreign expansion exposes a common blind spot: capabilities are often far more local than they appear.
Under Bob Iger, Disney famously described its international strategy as “authentically Disney, distinctly Chinese.” The insight wasn’t marketing — it was operational.
Disney wasn’t just exporting IP. It was acquiring or partnering for:
cultural fluency
consumer behaviour
regulatory navigation
on-the-ground execution
In other words, it wasn’t buying ingredients. It was buying local sauce.
IV: When Building Internally Doesn’t Work: Target's expansion into Canada
Target’s expansion into Canada is a clear example of how even experienced operators can underestimate how context-specific capabilities really are.
Despite a strong brand and decades of big-box retail expertise in the United States, Target struggled once it crossed the border. Issues in supply-chain execution, inventory accuracy, pricing perception, and merchandising localization compounded quickly.
While Target acquired store leases and brought its brand north, the local operating know-how required to run the system effectively proved harder to replicate than expected.
The result was a full exit from the Canadian market within two years, at an estimated cost of several billion dollars.
The failure wasn’t a lack of ambition or capital. It was a misjudgment of how transferable core retail capabilities really were.
V: The Risks of Buying the Sauce
Buying capabilities isn’t risk-free.
M&A can fail when:
integration erodes the very know-how being acquired
cultural mismatch undermines execution
or partners learn your processes, then compete independently
Sometimes companies don’t buy the sauce — they teach someone else how to make it.
This is why clarity around which capability is being acquired matters more than deal structure.
Closing Thought
I could make the sauce. A company could build the capability.
But the more useful question is: What are we actually trying to get good at - and what already exists that solves this better, faster, and with less learning risk?
At its best, M&A isn’t about growth for growth’s sake. It’s about recognizing when learning is the most expensive input of all.
Sometimes, buying the sauce is simply the most disciplined move.
Comments