Should the acquisition prove successful, it could lead to the emergence of a global confectionery powerhouse. Mondelēz previously made a $23 billion offer for Hershey in 2016, which was turned down by The Hershey Trust, the entity holding 80% of the company’s voting power.
Mondelēz recently unveiled a share buyback plan amounting to $9 billion and aims to pursue bolt-on acquisitions, reflecting its recent transactions with Chipita, Clif, and Ricolino in 2022, as noted by the company.
In comparison, Mondelēz’s buybacks in 2022 were below $3 billion, while Hershey’s market cap hovers around $38 billion, according to Reuters information sourced from the London Stock Exchange Group.
The potential merger between Hershey and Mondelēz could dramatically enhance Hershey’s global footprint and growth trajectory. Moreover, it may foster greater consumer loyalty by diversifying its portfolio with high-performing brands, as noted by Carl Quash III, head of snacks and nutrition at Euromonitor International.
As Quash III highlights, “Mondelēz holds a more global sales coverage across developed and developing markets whereas more than 90% of Hershey’s snack business is reliant upon the USA.”
Additionally, while Hershey’s revenue is concentrated among several billion-dollar brands such as Reese’s, Hershey’s variants, and Skinny Pop, Mondelēz boasts nearly a dozen billion-dollar brands, enabling it to generate growth from a diverse array of markets and categories, including Oreo, Cadbury, and Milka.
This acquisition bid follows Mondelēz’s robust Q3 earnings, during which it registered a 5.4% increase in net organic revenues to $9.2 billion. Adjusted operating profits also surged by 21% to $1.7 billion, as previously reported.
Potential Impact of a Merger on the Global Confectionery Market
A merger between these two industry giants would profoundly influence the global confectionery landscape. The resulting entity could command significant market share across key sectors such as chocolate, sugar confectionery, and gum, according to Quash III.
In the chocolate segment, a merger could consolidate nearly 50% of the market share among the top three competitors. Mondelēz would attain Hershey’s leading position in the U.S. chocolate market, thereby enhancing their dominance in the North American chocolate sector.
For sugar confectionery, Hershey could leverage Mondelēz’s global stature to distance itself further from Ferrero, the second-largest player, Quash III explains.
Furthermore, Mondelēz stands to gain in snack bars and savory snacks, “outranking even Mars/Kellanova in savory snacks,” he adds.
A merger would likely expand innovation capabilities for both companies, leading to increased product variety and availability, Quash III remarks.
According to Euromonitor International’s Snacks Industry Forecast Model, there would be greater opportunities for Hershey brands in segments such as sweet biscuits and healthier snack options.
Both companies have successfully introduced bold, brand-oriented products, such as Hershey’s Shaq-backed gummies and Mondelēz’s investment in Urban Legend, a better-for-you pastry brand. A merger would “align growth pillars and wield greater capabilities,” Quash III states.
Alternatives to a Merger That Could Strengthen Both Companies
While a potential Hershey-Mondelēz acquisition could significantly enhance brand coverage and resilience, other scenarios may also unfold. For instance, Quash III points out Mondelēz’s recent partnership with Lotus Bakeries to introduce co-branded products, like Biscoff and Cadbury in India and Europe by 2025.
This collaboration showcases how the two companies can exploit synergies and opportunities for growth without resorting to M&A activity. “Cobranded innovations alongside various bilateral contracts and collaborations could serve as an alternative to a merger,” Quash III adds.
He further states, “As demonstrated through sustainability initiatives, manufacturers can collaborate to create solutions that benefit consumers, the planet, and their bottom lines.”
Current Trends in M&A within Snacking and Confectionery
The race for leadership in the snacking and confectionery sectors intensified last August when Mars announced its acquisition of Kellanova, the maker of Pringles, Cheez-It, and Pop-Tarts, for $35.9 billion. This deal stands as one of the largest in the food and beverage industry, as previously reported by FoodNavigator-USA.
Additionally, the food and beverage sector has seen a surge of mergers and acquisitions this year, including Unilever’s strategic move to separate from its ice cream division and PepsiCo’s recent purchase of Siete.
Quash III concludes that “what we are really seeing is the response of manufacturers to a slowdown in growth and preparation for future uncertainties.”
