Nestle frontrunner for Kraft’s Polish chocolate firm Wedel - analyst

By Oliver Nieburg

- Last updated on GMT

Related tags: Chocolate, European union, Nestlé

Kraft Foods is accepting final bids for Wedel with Nestle best placed to secure the Polish chocolate business according to one industry insider.

Sources close to Dow Jones said the bidding process is set to close in the third week of June with six potential buyers vying for Poland’s leading chocolate producer, including industry giants Nestle and Hershey.

Nestle advantage

Jonathan Thomas, principal marketing analyst at Leatherhead Food Research, told ConfectioneryNews.com that Nestle made more sense as a potential bidder:

“It is already present in most of the Eastern European chocolate markets. It accounts for just 5 per cent of the Polish market for chocolate blocks and tablets at present, and acquiring the Wedel business would increase this figure substantially.

“Acquiring the Wedel business would also enable Nestle to expand further across the region, such as in the developing Russian market (where it continues to invest),”​ he said.

Thomas added that he would be surprised if Hershey secured the deal as its geographical focus appears to be upon developing markets in Asia, e.g. China, and past forays into the European market have proved unsuccessful.

Challengers

Other contenders for the €200m – €300m business include private equity firms Advent International and Bridgepoint. Industry insiders said Polish-based confectioner Jutrzenka could be another candidate but speculated that Ukrainian firm Roshen could no longer be in the running.

Kraft has been forced to sell the Polish business under EU competition rules as part of its Cadbury takeover in February. The 150-year-old confectioner is Poland’s oldest chocolate brand and became part of the Cadbury Corporation in 1999. It is as yet unclear whether its production facilities, modernised following Cadbury’s acquisition, are to be included in the sale.

Sources close to the deal considered a large multinational or a local company better placed to acquire Wedel than a private equity firm without the same level of synergies.

Eastern Europe market potential

Although recent growth levels have been affected by the economic downturn, Thomas said that the Eastern European confectionery market has “considerable potential to expand further”.

He suggested that per capita consumption of chocolate in the region lags well behind levels observed further west, though, “the additional fact that premium chocolate is becoming increasingly popular suggests that market value is set to grow further once the economic situation eases”.

Kandia Sale

Kraft’s Romanian business Kandia-Excelent, with an annual chocolate production capacity of 20,000 tonnes, is also on the block – again a consequence of EU takeover rules. While speculation on Wedel mounts, conjecture on the Kandia sale is somewhat absent.

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