Mondelez International is said to be looking to buy chocolate maker Hershey - a deal that would make it the world’s largest candy company.
Shares of Hershey Company have been climbing, with its market capitalisation currently worth around $35bn, rising by as much as 19% over the last couple of days.
Meanwhile, Mondelez stocks have fallen, with a market capitalisation of about $82bn.
This isn’t the first time the Cadbury’s producer has explored acquiring its competitor, with Hershey’s rejecting a $23bn takeover bid in 2016.
According to Yahoo Finance, the significant jump in Hershey’s shares is telling, with the chocolate maker ordinarily having minimal movement. Prior to this recent hike, it has been no more than 5% over the last year.
Looking at Hershey’s 2024 Q3 financial results, its net sales were valued at $2,987.5m - a drop of 1.4%, with net income of $446.3m - a decrease of 12.7%. The company is reporting flat growth of around 2%.
“We believe in the resiliency of our snacking categories and the strength of our brands,” said Michele Buck, The Hershey Company president and CEO.
“While year-to-date results have been affected by historically high cocoa prices and a challenging consumer environment, we are laser-focused on controlling what we can and are acting with immediacy to deliver value to customers, consumers and shareholders. Our priorities are to drive top-line and market share growth by winning in-store with key customers, expanding our chocolate portfolio, accelerating sweets, and maximizing our seasonal strength.”
Mondelez’s on the other hand saw robust results for Q3 2024, with net revenues rising 1.9%, reaching $9.2bn.
“We remain focused on reinvesting behind our brands, driving distribution, expanding our capabilities and maintaining cost discipline,” Dirk Van de Put, Mondelez chair and CEO commented.
"We continue working to accelerate our core business while strategically reshaping our portfolio – for example, through our expanded partnership with Evirth, a leading manufacturer of cakes and pastries in China. We are excited about the opportunity to further leverage our iconic brands and distribution to create more premium offerings in the fast-growing cakes and pastries space.”
This follows the recent acquisition of Kellanova by fellow confectioner giant Mars in August - a deal that was worth almost $36bn.
Rising prices and increasing interest in healthy eating have arguably made times tougher for confectioners, with analysts suggesting further consolidation in this field is unsurprising.
“Any acquisition by Mondelez of Hershey would represent a real deepening of its commitment to the confectionery market at an interesting time as the obesity and ultra processed foods (UPF) debate and elements of public policy evolve on both sides of the Atlantic,” Clive Black vice chairman of Shore Capital told Food Manufacture.
“No doubt synergies will exist across the firms from the removal of head office duplication to sourcing and distribution, any financial output clearly being dependent on any price paid. Whether or not there are ‘Hersheyphiles’ who would be aghast at their chocolate firm potentially losing independence, also remains to be seen. So, at this stage, more questions than answers, but Mondelez is potentially showing considerable ambition in seeking to acquire a c£9-10bn play."
Rima Mittra, associate director, food & nutrition at FutureBridge, added: “Another potential major US acquisition will come as no surprise with an incoming Trump government said to favour acquisitions and partnerships.
“With strong sustainability commitments like 100% sourcing visibility in cocoa producing countries Côte d’Ivoire and Ghana by 2025 and establishing direct sourcing relationships with farmers, Hershey has been proactive in addressing challenges within the cocoa industry, such as price volatility and supply chain disruption, which could provide significant advantages for Mondelez from major cost cutting opportunities to cocoa sourcing solutions.
“However, an acquisition would face challenges due to the Hershey Trust Company, which historically has held substantial voting power—nearly 80% as of last year. This situation mirrors past hurdles faced by Hershey, including a notable instance in 2016.”
