If successful, the acquisition would have have created a global confectionery powerhouse. Mondelēz previously offered $23 billion for Hershey in 2016 and The Hershey Trust, which holds 80% of voting power for the company, rejected it.
The rejection comes the same day Mondelēz announced a share buyback program of up to $9 billion – replacing the current $6 billion authorization – and reaffirmed its interest in mergers & acquisitions and particularly bolt-on assets, like Chipita, Clif and Ricolino, which it purchased in recent years.
“We continue to make significant progress against our strategy of accelerating growth and focusing our portfolio in the attractive, resilient categories of chocolate, biscuits and baked snacks,” Mondelēz Chairman and CEO Dirk Van de Put said in a statement.
He also noted the company’s $9 billion share repurchasing authorization “reflects the strength of our business with robust profit dollar and cash flow growth to reinvest in brands and capabilities.”
A combined Hershey and Mondelēz could benefit both companies
While it is unclear if or when Mondelēz will up its bid, the potential combined Hershey and Mondelēz business could significantly benefit both businesses.
For example, Hershey’s global presence and growth while strengthening consumer loyalty by adding more high-performing brands to its portfolio, Carl Quash III, head of snacks and nutrition at Euromonitor International shared with FoodNavigatorUSA.
“Mondelēz holds more global sales coverage across developed and developing markets whereas more than 90% of Hershey’s snack business is reliant upon the USA,” Quash III said.
Additionally, Hershey’s revenue is heavily concentrated in several billion-dollar brands, such as Reese’s, Hershey’s variants and Skinny Pop, whereas Mondelēz “holds nearly a dozen billion-dollar brands,” which source growth from a variety of markets and categories, including Oreo, Cadbury and Milka, among others, Quash III said.
Mondelēz’s bid comes after strong Q3 earnings where it posted net organic revenues up 5.4% to $9.2 billion, while adjusted operating profits grew 21% to $1.7 billion, as previously reported by FoodNavigator.
How would a merger impact the global confectionery market?
A merger between the two giants could significantly reshape the global confectionery market, and the combined entity could dominate the top tier sectors, including chocolate, sugar confectionery and gum, Quash III explained.
In chocolate confectionery, a potential merger would consolidate nearly 50% of the market share among the top three players where Mondelēz would gain Hershey’s No. 1 position in the US chocolate market and together they would lead Canada’s chocolate sector, strengthening their presence across North America, he added.
For sugar confectionery, the dynamic would favor Hershey leveraging Mondelēz’s global rank to widen the gap with Ferrero, the second largest player, Quash III said.
Additionally, Mondelēz could see gains in snack bars and savory snacks, “outranking even Mars/Kellanova in savory snacks,” he added.
If a merger occurs, “innovation capacity would likely expand for the businesses,” through increased product variety and availability, Quash III said.
According to Euromonitor International’s Snacks Industry Forecast Model, “spaces like sweet biscuits and better-for-you snacks would be open for an even greater presence of Hershey brands,” he said.
Both companies have demonstrated bold, brand-focused launches with Hershey’s recent Shaq-backed gummies and Mondelēz’s investment in better-for-you pastry brand Urban Legend, and a merger would “align growth pillars and wield greater capabilities,” he said.
Alternatives to an M&A could continue to bolster presence for both companies
A potential Hershey-Mondelēz deal could enhance business coverage and resilience across brands, geographies and product categories, however, there is also the possibility of an alternative outcome that does not involve a merger and acquisition and instead the two companies could collaborate, Quash III said.
One example is Mondelēz’s recent partnership with Lotus Bakeries to co-launch co-branded products like Biscoff and Cadbury in India and Europe by 2025, Quash III explained.
“The two companies found synergies and an opportunity to work together to drive growth without M&A activity involved. Cobranded innovations among other bilateral contracts and collaborative work could be a potential reroute to a merger scenario,” Quash III said.
He added, “As we have seen with sustainability, manufacturers can work together to create things that benefit the end consumer, the planet, and the bottom line.”
The rise of M&A in snacking and confectionery
The current leg in the race to lead the snack and confectionery space began with Mars last August when the multinational snack and candy maker announced its acquisition of Kellanova – maker of Pringles, Cheez-It and Pop-Tarts, among others – for $35.9 billion. The deal marked one of the largest acquisitions in the food and beverage industry, per previous reporting from FoodNavigator-USA.
The food and beverage industry also saw a wave of mergers and acquisitions this year, including Unilever’s plan to separate from its ice cream business and PepsiCo’s purchase of Siete.
“What we are really seeing is the response of manufacturers to a slowdown in growth and preparation for future uncertainties, Quash III added.
