The premium end of the market will help the new owners of Australian confectioner Darrell Lea differentiate themselves from market leaders Mars and Kraft, according to a market analyst.
The Australian confectioner was snapped up earlier this week by premium pet food company VIP Petfoods, owned by the wealthy Australian Quinn family.
Darrell Lea had fallen into administration in July and appointed PPB Advisory to search for buyers.
Analyst Jonathan Thomas of Leatherhead Food Research had previously tipped Korean confectioner Lotte as the likeliest candidate for the firm.
Reaction - Gone to the dogs?
He told ConfectioneryNews.com today that he was shocked that the confectioner had gone to a pet food firm.
“It was quite surprising to see Darrell Lea had been bought by a pet food company. I guess it makes sense that an Australian company would want to snap up an iconic brand like Darrell Lea.”
VIP Petfoods – wealthy family owners
VIP Petfoods is an Australian firm that positions itself as the nation’s premier producer of chilled petfood products.
The company has a 7,000 m2 factory in Queensland, which exports products to markets including Canada, Korea, Japan, and the USA.
VIP Petfoods owners, the Quinn family, are among the wealthiest individuals in Australia. Reports from last year predicted a USD $410 million (AUD $400m) sale of VIP Petfoods to private equity group CHAMP.
Asked how The Quinn family might fare in the confectionery world, Thomas said: “My suspicion is that they may try to compete at the premium end of the confectionery industry to set themselves apart from the likes of Mars, Nestle, etc.”
“I do not see the company making much headway in the mass market against the global giants, especially since further industry consolidation cannot be ruled out.
The Australian confectionery market, which is expected to grow around 5% this year, is led by Mars. Cadbury is next largest player, while local manufacturer Natural Confectionery holds third place, according to data from Euromonitor International.
The Quinn family will embark on a restructuring project of Darrell Lea that will mean around 418 job losses. The revamp will also see 27 Darrell Lea stores scrapped in the next week.
Darrell Lea profile
Darrell Lea sells speciality chocolate products and liquorice in 69 franchise stores and 1,800 retail outlets across Australia, New Zealand and the USA.
It holds a 1.6% share of the USD $4bn Australian confectionery market, according to Euromonitor International.
Thomas added that he expects Darrell Lea’s international operations, such as US business, to remain in place.
“However, it is possible at some point in the future that the new owners will retreat to Darrell Lea’s Australasian heartlands, especially if growth rates remain modest in the world’s more developed countries,” he said.