As I’ve come to realize over the years, my crystal-balling powers haven’t earned me any plaudits. Hence, it’s one of the reasons I stay away from speculation regarding who’s going to buy whom. There’s so much that goes on behind the scenes that we don’t know about — as with politics, government and global affairs — that it’s hard to really gauge what will happen when you’re just playing a guessing game.
But there are always exceptions to the rule. On Saturday morning a Reuters article published by ET Brand Equity newsletter reported that Ferrara Candy Co. was “preparing to participate in the auction for Swiss food group Nestlé SA's U.S. candy business, people familiar with the matter said on Friday.”
Nestlé had already indicated that it was considering selling its U.S. confectionery division in June. The manufacturer of such high-profile brands as Butterfinger, Baby Ruth, Nips, SweeTarts and Raisinets provides a tempting mix of chocolate and sugar confections for anyone competing in or looking to compete in the U.S. confectionery market.
According to the Reuters story, Nestlé’s U.S. annual sales equal $923 million. In addition, “Analysts at Jeffries peg its value at between $1.5 to $2 billion.” Where I come from, that’s no longer small change.
What’s interesting is that Ferrara Candy Co., which is owned by equity group L. Catterton, itself explored a possible sale earlier in the year. Apparently, when no one wanted to agree to a $1.3-billion price tag, the sale offer disappeared.
If the earlier speculation is true, L. Catterton and the execs at Ferrara Candy Co. are looking at Nestlé U.S.’s strong chocolate brands as well as its broad array of iconic sugar brands. And let’s not forget about scale, either, which theoretically can reduce manufacturing and logistical costs.
Of course, L. Catterton will undoubtedly have some company in the bidding process for Nestlé’s delicious brands. Reports say Ferrero is interested. And let’s not forget pladis, which has indicated it’s committed to growing its North American business. Nor should we exclude any other equity groups, who seem to love confectionery companies.
Moreover, acquiring confectionery companies and then merging them into successful new entities can be a long and demanding process. Consider Lindt & Strungli’s recent half-year report. A 3 percent drop in sales for the North American group (Lindt USA, Ghirardelli and Russell Stover) was “influenced mainly by the strategic realignment of Russell Stover, which is making progress but will take more time than originally anticipated.”
Now that the SKU-trimming and new product initiatives have launched, I’m sure that Lindt & Sprüngli will eventually get Russell Stover back on a growth track. They’ve hired a new president, Andrew Deister, formerly with Robert Rothschild Farm, an award-winning premium specialty foods organization, to do just that.
It is a long-term effort, nonetheless, a multiyear blueprint that Lindt has used previously for Lindt USA and Ghirardelli. There’s something about the Swiss, they known for not only their time pieces, but also for having the time to do things right.
Not sure about investment groups. Although they are a bit more patient than the reality show “house flippers,” their ultimate goal is to buy and then sell for a profit.
So readers, place your bets. And may the best organization win out.