Two of Spain's biggest confectionery producers are feeling the pressure of competition in the market and are actively seeking partners to help them survive in the increasingly cut-throat market.
Catalan group Agrolimen is looking for a buyer or a partner for its confectionery subsidiary Joyco, while the lollipop maker Chupa Chups, also based in Catalonia, is seeking partners for a Maxxium-style distribution agreement, according to reports in the Spanish press.
A report in Alimarket claims that the Carulla family whose holding company controls Agrolimen has begun looking for a strategic partner for the Joyco unit which would give it the necessary critical mass to compete in a sugar confectionery sector made all the more difficult by the recent acquisition of Dandy and Adams by British giant Cadbury Schweppes.
Although it produces a range of confectionery products, the gum market now dominated by Cadbury and Wrigley is where Joyco is the most active - indeed, it is the market leader in the children's gum sector with brands such as Boomer bubble gum. The report suggests that Wrigley is in fact top of the list to tie up with Joyco, although the company is also said to be in talks with Cadbury and with US chocolate confectionery group Mars.
It has also held previous talks with Chupa Chups, but that company's own recent problems led to the negotiations being broken off.
As well as its various businesses in Spain, making gum and toffees in particular, Joyco also has numerous foreign subsidiaries, in Mexico, China, the US, India and Russia. Its business in this last market has been severely disrupted by Cadbury's takeover of Dandy, however: Cadbury was the main distributor of Joyco products in Russia, which were made by Dandy there.
It also has production operations in the Philippines and Colombia, as well as sales divisions in France, Italy and Poland.
Meanwhile, Chupa Chups does not see a sale of the business as the best means of competing in the future but rather a strengthening of its distribution.
According to a report in La Vanguardia newspaper, the company has been inspired by the success of Maxxium, the global distribution company owned jointly by Jim Beam Brands, Vin & Sprit (which makes Absolut vodka), Highland Distillers (Famous Grouse) and Rémy Cointreau.
Xavier Bernat, president of Chupa Chups, has sat on the Rémy Cointreau board for the last year, and has clearly been impressed by the success of Maxxium, which draws on the regional strengths of each of its members to market and distribute all four companies' brands.
Bernat is hoping to form a similar alliance in the confectionery sector, and is looking for European and US groups to join the venture. Like Chupa Chups, he is hoping that the members of any future distribution alliance would be medium sized, family-owned companies sharing a similar ethos.
Faced with the same levels of increasing competition as Joyco, Chupa Chups has seen its profits dwindle over the last few years, and in fact it racked up losses of €18 million in 2002. A major restructuring of its finances over the last 18 months should at least push it back into the black for 2003, but the highly competitive market conditions still remain, and something needs to be done to prevent future slides back into the red.