The chocolate sector looks set for further consolidation with the smaller players struggling to offset higher cocoa prices, claims one market analyst as the rumour mill goes into full gear over potential rivals to Kraft for a Cadbury takeover.
Jon Cox, based at Kepler Capital Markets, told ConfectioneryNews.com that the bigger companies now having more purchasing power means the market is ripe for M&A activity.
Just last week, US based Hershey and Italian manufacturer Ferrero, in separate statements to the London Stock Exchange, confirmed their interest in buying UK giant Cadbury, and there is increasing speculation that Nestlé may also try and outbid Kraft in the race for the UK chocolate maker.
Industry sources said Nestlé is reviewing its options with bankers in relation to a bid, according to a report on Bloomberg.
And shares in Cadbury hit a new all-time high today following the reports of the potential offers, rising 1.4 per cent to 812 pence, having risen as high as 816 pence earlier in the session, to hit a new record, and well above the 724 pence value of Kraft's bid.
Kraft’s unsolicited $16.4bn bid for Cadbury, if successful, would result in the creation of the largest confectionery manufacturer and threaten Nestlé’s and Hershey’s market positions.
Interest in Cadbury stems from the confectioner’s broader exposure to international markets, particularly its strong position in developing markets like India and Mexico.
However, Cox said that Nestlé may also be looking at Swiss manufacturer Lindt & Sprungli as a takeover target, a chocolate maker he predicts will be in a weak state due to the negative impact of rising cocoa prices
He claims Lindt is an ‘obvious' takeover target for the global food group.
“While many companies are probably interested in Lindt, I think Nestlé would be a closer cultural fit compared to a US company. Nestlé lacks a global premium chocolate brand and I think it is now or never,” claims Cox.