There are only a few major confectioners, six to be exact. And currently there’s a four-on-one cage match underway to see who can come out on top of the heap. The world’s major players in candy are Mars/Wrigley, Cadbury, Nestle, Kraft, Hershey and Ferrero. Mars bought Wrigley last year for $23 billion securing one of the largest brands in the business and the number one spot in the industry. This year, the rest of the industry has set it’s sights on Cadbury. With Kraft throwing the first blow, Nestle, Hershey and Ferrero are now expressing interest in acquiring the historic British confectioner. The reason it’s turned into a war is because Cadbury is well aware of it’s worth and will not go easily.
According to Mark Scott’s article for BusinessWeek, the candy industry is consolidating and there are few places left to target for growth. Miller Zell conducted a focus group earlier this year with shoppers aged 16-35 where we asked about their behavior when it comes to making candy purchases. Most of the respondents, event the teen group, admitted that candy purchases are typically relegated to holiday and gum purchases. Most indicated that health was a consideration in their candy purchases and while most candy is viewed as empty calories, gum is a necessary oral hygiene accessory.
So where does this leave these confectioners? In emerging markets like India; which brought Cadbury a 16.1% revenue increase last year. Scott reports that emerging markets have an “insatiable appetite for candy [which] is fueling double-digit market growth.” No wonder Hershey and Kraft want in on that action. The predominance of their candy sales are domestic. The western hemisphere only saw a 5.2% increase in candy sales last year. Kraft actually reported a 5.7% decline.
Scott goes on to detail why this fight for Cadbury is important to the other companies and the candy business overall. However, in the grand scheme of things, it’s interesting to watch the consolidation of this particular category. One has to wonder, if over time it will continue to significantly diminish in size, once the rest of the world adopts the western way and decides that the joys of candy aren’t worth the calories or cavities. Do you think that the candy category will eventually go away as a major business and be reduced to a segment within a CPG? Can you think of any other products categories where major players dissolved to segments of larger diversified consumer companies?
