Mondelez eyes Hershey: $50 billion snack giant in the making?
American multinational confectionery company, Hershey’s stock went up by more than 10% after Mondelez International, the owner of UK-based Cadbury, approached the US chocolate maker for a potential buyout. The union between the two food firms could produce a snack food giant with total yearly sales of US $50 billion (£39.2 billion).
Hershey and Mondelez Declined to Comment
According to BBC News, both Mondelez and Hershey have declined to comment on the report. The plan is said to be still in a nascent stage, and it is still unknown whether the discussion will lead to a deal, according to Bloomberg.
Any merger would have to be approved by the Hershey Trust Company, which owns a majority of the voting control over Hershey. The charitable trust has in the past blocked takeover attempts, including the $23 billion bid proposed by Mondelez in 2016.
Potential Impact of a Merger
The integration of Hershey with Mondelez would create a synergy of some of the best-known snacks around the globe. The current products by Hershey’s include Hershey’s Kisses and Reese’s Peanut Butter Cups while popular products of Mondelez are the global favourites, Ritz crackers, Oreo biscuits, Toblerone chocolate and Cadbury.
According to industry specialists, such a deal might assist the companies adapt to the realities of the market which has recently displayed a trend in sluggish growth of consumption of packaged food products as consumers are forced to cut their spending because of high prices.
Rising Costs Wigh on Chocolate Makers
The chocolate industry is currently facing significant inflation pressure which has led to the higher prices for cocoa. Last month, Hershey cut its full-year revenue and profit estimates, with Chief Financial Officer (CFO) Steve Voskuil citing high cocoa prices as the “biggest source of inflation” for the chocolate maker moving forward.
Other giant food companies have also recorded similar situations. Kraft Heinz recently slashed its annual sales and profit forecasts after customers cut spending due to previous price hikes.
Industry Consolidation on the Rise
Experts believe that the combined ventures in the food industry will continue to rise as firms look to find new businesses in a sluggish market. In August, the confectionary giant, Mars bought Kellanova, which produces Pringles and Pop-Tarts, for US $36 billion.
There were rising expectations for an even higher level of merger activity as the upcoming US administration led by President-elect Trump is believed to be more friendly to many deals.
The Hershey and Mondelez firms merger could alter the international Snack business by centralizing ownership of some of the most recognizable brands.