Major chocolate merger afoot? Hershey shrugs off talk of Ferrero deal as ‘speculation’

By Oliver Nieburg

- Last updated on GMT

Big kiss and make up on the horizon?  Analysts speculate on a Hershey and Ferrero merger. Photo: iStock - RickSause
Big kiss and make up on the horizon? Analysts speculate on a Hershey and Ferrero merger. Photo: iStock - RickSause

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Analysts say Hershey may be eyeing a joint venture or merger with a major international player such as Ferrero, but the US chocolate giant has dismissed the claims as “speculation”.

Credit Suisse analyst Robert Moskow wrote in a note that Hershey could be considering a tie-up after pulling out of the 2016 Consumer Analyst Group of New York (CAGNY) conference in favor of hosting its own analyst day.

Rumor mill

But Jeff Beckman, head of corporate communications at Hershey, told ConfectioneryNews: “The comments from Robert Moskow are speculation.  We have a history of not participating in CAGNY every year.  In years we don’t go to CAGNY, we hold our own analyst day, just as we did last in 2012 and are doing again next year.”

Ex-Coca-Cola man to lead Hershey sales team

Hershey chief sales officer

Hershey this week appointed Rob Gehring as global chief sales officer. Gehring will join on January 18, 2016, from Coca-Cola North America where he has served as president of the beverage giant’s global Walmart team since 2011.

Moskow said in his note: “It is possible that the [Hershey] Trust would consider diluting itself to enter a merger or a joint venture with a strong international player (perhaps with Ferrero?), but this is just speculation on our part,” ​he said.

He added it was highly unlikely the Hershey Trust, which controls 80% of the stock, would ever consider selling the company.

Q3 fallout

The speculation follows a tough Q3 for Hershey in which it posted a 31% drop in net earnings after setbacks in China and a slower retail takeaway in its home US market.

Marcia Mogelonsky,  director of insight for Mintel Food and Drink, told this site Hershey had suffered as US consumers made more mindful snacking choices, adding that Mexico’s ‘fat tax’ had negatively impacted consumer behaviour.

Merger rumors resurface

Rumors were rife of a Ferrero and Hershey tie-up in 2009 when Kraft was eyeing its Cadbury takeover.

That never materialized, but in 2011 Hershey and Ferrero established a joint transport and warehousing operation for confectionery products in North America.

Mogelonsky said a merger or marketing and sales tie-up with Ferrero could help Hershey take its premium brands Scharffen Berger or Dagoba to Europe and help it boost its premium credentials in the US.

“Hershey may need a European imprimatur to promote premium. Its own name may be too closely linked with mainstream,” ​she said.

“If Hershey does not go to Ferrero, it is possible that Lindt (fresh off its purchase of Russell Stover) may be shopping or Hershey may look farther afield, hoping to strike a deal with Ülker and be able to reach out to the bigger Eastern European/Middle Eastern markets,” ​continued the analyst.

Sales and Ferrero speculation

According to Euromonitor International, Hershey is on course to overtake Ferrero as the fourth largest global confectionery company based on year-to-date retail value sales and projections for the remainder of calendar year 2015.

Ferrero’s previous owner Michelle Ferrero died in February this year. Speculation followed that the firm was an acquisition target for Nestlé – but company CEO Giovanni Ferrero, Michelle’s son, later said “Ferrero is not and will not be up for sale”.​ 

China troubles

china map

Credit Suisse analyst Robert Moskow said in his note: “The Hershey board and CEO Bilbrey may decide that the company needs to bring in an outsider to cull back the company's cost structure and the flailing investment in China." ​Hershey hopes China will reach $10bn by 2017, a sevenfold increase on 2013 levels. It has identified China as its international priority market and late last year acquired Chinese confectionery and snack firm Shanghai Golden Monkey Food Company.


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