Is Mondelēz in the market for more snack companies after its Tate’s Bake Shop deal?

By Douglas Yu

- Last updated on GMT

Mondelēz will acquire Tate’s Bake Shop for about $500m in summer this year. ©GettyImages/Daniel Bendjy; Tate's Bake Shop
Mondelēz will acquire Tate’s Bake Shop for about $500m in summer this year. ©GettyImages/Daniel Bendjy; Tate's Bake Shop
Mondelēz's deal to buy New York-based Tate’s Bake Shop for $500m could soon be followed by more acquisitions in the premium snacks space, says one Edward Jones analyst.

Edward Jones analyst, Brittany Weissman, also believes the Tate’s acquisition makes sense to Mondelēz as it has been focusing on snacks, particularly the cookie side of its business, for a long time.

She noted the relatively new CEO (appointed last November) inherited the previous executive Irene Rosenfeld’s vision of “building the world’s best snacking company,”​ ​and suggested the company could acquire more craft snacking brands moving forward.

Mondelēz’s international markets​ have been performing well. However, its US business has been hurt by changing consumer behavior, increased competition as well as rising input cost over the last several quarters, said Weissman.

“That’s why Mondelēz has focused much more on its cost-cutting strategy, but now it’s shifting towards growth… part of that is acquiring fast-growing small brands and building their distribution,”​ she said.

The Oreo maker previously gobbled up Enjoy Life Foods​ in 2015. But will Tate’s just be an add-on to the company’s growing premium baked goods portfolio?  

“Enjoy Life Foods is a cross of multiple categories in the snacking space, and it sits well with health-conscious consumers – it can’t have nuts, dairy or gluten,”​ Weissman explained.

“Tate’s could have a similar growth potential, but it doesn’t have the health and wellness tail behind it… it will grow mainly through increasing distribution rather than expanding product lines.”

Entering the premium cookies market

Dirk Van de Put, CEO of Mondelēz, said Tate’s is a “strategic fit”​ for the company’s portfolio, and this acquisition will help Mondelēz enter the US premium cookies segment.

“Tate’s has been one of the fastest growing biscuit brands in the US over the last 12 months. The brand’s sales have quadrupled over the past five years. In 2018, retail sales in measured channels have grown by more than 40% through March,”​ he said.

Mondelēz said it will operate Tate’s as a standalone business and maintain the brand’s authenticity, while providing resources to accelerate growth.

Big companies turn to snacks; who takes care of chocolate?

Acquiring niche snack companies has been an on-going strategy for big confectioners capitalizing on the health and wellness trend, such as Mondelēz and Hershey – both aiming to become snacking powerhouses​.

Pablo Zuanic, a Wall Street analyst at Susquehanna International Group, suggested some companies could potentially consolidate the chocolate industry​.

But who is going to do that as Mondelēz’s 2016 takeover of Hershey​, which would have created the world’s largest confectionery company, failed?

“We have seen consolidation already especially when Ferrero bought Ferrara and Nestlé’s US confectionery business,”​ said Weissman.

However, the chance to have one company consolidate the entire chocolate market remains low, she noted.

“Mondelēz’s market share in the US chocolate is not meaningful even though it introduced Milka Cadbury chocolate to the country… Globally speaking, the Cadbury brand alone probably doesn’t provide a ton of opportunities [for Mondelēz] to consolidate the industry,”​ said Weissman.

Even if Mondelēz reproaches Hershey, the Hershey Trust would be a huge roadblock, she added.

“The attorney general of Pennsylvania needs to sign the potential sale of Hershey… but it’d be interesting to see what the new Hershey Trust board’s take on the chocolate business as they are close to a complete reconstitution,”​ said Weissman.

Related news

Follow us


View more