Weekly comment
Adjusting to Mars' centre stage ambitions
anyone these days unless you're a duo, in the glamorous world of
food manufacture, the team-up route to success may not be quite as
simple.
In the space of the last two months, the world's leading confectioners have adopted different stances on their long term strategy, with Mars' marriage to Wrigley contrasting with Cadbury's divorce of its US beverage and candy arms. Although Tinseltown has forged such golden couples as Fred and Ginger and Michael Jackson and bubbles the chimp, it has also had its heartbreak. Likewise, the success of a similar joining of forces in modern food finance appears to be just as difficult to predict. Certainly, the $23bn deal agreed by Mars and Wrigley gives it huge weight in the confectionery market by creating an industry giant with expected annual sales of $27bn. With current global uncertainty over financial markets, not least in food production where raw materials have been hitting processors margins hard for some time, the deal could make matters more uncertain still - at least as the industry adjusts. The legacy of the deal, which represents a seismic shift in the current confectionery market, is likely to cause tremors that will be felt throughout the wider-food industry. Its impact on the food industry could lead to a number of similar large-scale buyouts in the future. Nervous investors could be looking to reassess existing market strategies simply on the strength of a single deal. Most pressing for the wider food industry, though, is the domino effect we may now see as a result. In the confectionery market alone, Cadbury is coming under the spotlight from market analysts about how it plans to adapt. Cadbury has itself recently moved to split its US-beverage arm from its confectionery operations, in a bid to better focus on the individual segments. But Mars' move could force it to further reconsider their strategy - or make it an open target for other multinationals with a confectionery craving. Popular thinking amongst analysts reads that Cadbury may now have to look to purchase beleaguered US rival Hershey if it is to regain its lost market share, particularly in the US market. A consequence of not making such a move could otherwise lead to other food multinationals themselves moving for Cadbury to bolster their own positions within confectionery. But is this a sustainable pattern for the industry, and will investors force the hand of manufacturers to enter into deals in a bid to keep up with rivals to offset current fears about market direction? Like any great star, true significance is often best viewed from hindsight and longivity. Mars will be hoping its time on centre stage ranks it as one of the greats. Break a leg. Neil Merrett is a staff reporter for BeverageDaily.com and has written on a variety of issues for publications in both the UK and France. If you would like to comment on this article, please e-mail Neil.Merrett 'at' decisionnews.com
