Even though Ferrero’s CEO previously dismissed speculation the firm will be sold upon the death of its owner last year, Mondelēz may still make moves for its US operations in the next few months, director of insight at Mintel, Marcia Mogelonsky, told ConfectioneryNews.
According to IRI data (last 52 weeks ending August 7, 2016), Hershey tops the chocolate category in the US market with $2bn total sales, followed by Mars with $1bn total sales; Nestle, $193m; Lindt, $40m; and Ferrero with $36m.
Hershey itself dismissed analyst claims it would attempt to acquire Ferrero as speculation in December last year.
Cost cutting strategy makes Kraft merge uncertain
This site previously reported that SIG analyst believes that in the end, Mondelēz will run out of time and will be taken over by Kraft Heinz. Mondelēz split off from Kraft a few years ago.
However, Mogelonsky said: “Mondelēz is expensive, and it is not clear what Kraft Heinz would gain by re-uniting with an expensive, confectionery-forward company that is in the process of deep cutbacks across its entire range.”
“The major problem for Mondelēz will be to increase its leverage in the confectionery space as that space becomes more difficult to operate in. As consumers shift to healthier eating habits, confectionery is one of the categories that are being squeezed,” she said.
“Mondelēz will have to figure out how to cut costs and grow sales while consumers turn to more healthy categories, many of which are outside the company's range.”
Hershey purchase would not bolster Mondelēz’s standings
Mondelēz’s revenues in Q1 2016 fell 16.8% to $6.5bn compared to the same period of time last year, and its organic net revenues grew 2.1%. But this growth, Mogelonsky, said, “came as the result of major cost cutting efforts, which are ongoing as of now”.
“Mondelēz is not in the best shape right now, and the very pricy purchase of Hershey would not bolster its standings,” she claimed.
“While Hershey has been performing better than Mondelēz over the past four years, the cliché that ‘a rising tide lifts all boats’ may not apply here - the relative merits of Hershey would not be enough to float the fortunes of Mondelēz, which is digging deep to implement cutbacks across its business.”
Mogelonsky predicts that in the current environment, anything is possible for Mondelēz in the next 12 months.
Kraft Heinz and PepsiCo would probably want to see the effects of the Mondelēz’s cost cutting measures first, if either attempt to acquire the company, she said.