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Home arrow Market Research Findings arrow Food and Drink arrow Kraft Targets Cadbury’s Strong Portfolio
Kraft Targets Cadbury’s Strong Portfolio PDF Print E-mail
Written by Euromonitor International   
05 Oct 2009
Following Mars' acquisition of Wrigley, further consolidation in the global confectionery market was set to follow, with Cadbury likely to be the focal point either as acquirer or acquisition target.

Kraft's bid for Cadbury is therefore not a surprise and is a good strategic move for the American giant looking to extend its geographic presence in key emerging markets as well as the lucrative gum category.

Coupled with this, the economic downturn has increased pressure on manufacturer margins and the economies of scale an acquisition of this size should produce would help to alleviate this in the future, particularly given the relatively high margin nature of confectionery.

Cadbury saw its global confectionery share increase from 10.2% to 10.3% in 2008, with it accounting for almost 30% of the global gum market.

Combined with its strong brand portfolio, this makes Cadbury an attractive proposition, but its strength could be the principle stumbling block for Kraft, as witnessed by Cadbury's initial dismissal of the bid.

Having spun off its soft drinks business, its focus is very much on confectionery, and rather than a disposal, speculation has focused on it looking to expand, potentially reopening its interest in Hershey.

Hershey's ownership structure, however, is a significant barrier to such a move, and led to the rejection of a Nestlé/Cadbury joint bid in 2002.

In a reversal of positions, it could now be that Hershey will look for a tie-up with another company, most likely to be Nestlé, in order to rival Kraft's bid, acquire some of Cadbury's assets and facilitate its international expansion outside of North America.

Cadbury's wide geographic, category and brand coverage make it attractive to a wide range of suitors, but also put it in a strong position to continue as an independent entity, ensuring any acquisition would come at a high price.

For further related articles, please visit Euromonitor International .

7th September  2009

 
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