Global M&A: Still the chocolate industry sweetspot?

• Published date: 01 March 2019
• DOI: http://doi.org/10.1002/tie.21996
• Author: Lawrence Allen
• Date: 01 March 2019

INTERNATIONAL BUSINESS CASE STUDIES

CASE COMMENTARY

Global M&A: Still the chocolate industry sweetspot?

Lawrence Allen

Plano, Texas

Correspondence

Lawrence Allen, 4441 Avebury Drive, Plano,

TX 75024.

Email: Lawrence.allen@chocolatefortunes.net

Like a dividing cell under the microscope, the American snack food market has split apart into

two distinct cells, each with its own unique consumer DNA. The two market segments can best

be defined as legacy consumers and next-generation consumers. This tectonic shift in the con-

fectionery industry may make global industry-giant mergers more a battle between dinosaurs, lit

by meteor light.

KEYWORDS

Cadbury, chocolate, food industry, Kraft, M&A

Dr. Anwar's case study of Kraft's acquisition of Cadbury is a fascinat-

ing, expansive, and in-depth look at the complex world of global

mergers and acquisitions between large branded snack food conglom-

erates. His insights are timely and wide ranging, with valuable lessons

for any aspiring or even seasoned global executive. And understanding

why such mergers end up the way they do is made all the more imper-

ative when considering the impact of recent fundamental tectonic

shifts within the confectionery industry—which may make such global

industry-giant mergers more a battle between dinosaurs, lit by

meteor light.

Today's retail experience is in the midst of change as fundamental

as when mom n’pop shops once gave way to the neighborhood

supermarket and, subsequently, the supermarket to the superstore.

Two key drivers of this current revolutionary change are intimately

conjoined: the purchase behavior of the next generation of consumers

and technology. In addition, there is no snack food industry where

these forces for transformational change are more apparent than the

chocolate and confectionery industry.

So, will these fundamental changes rebalance the investment

priorities of these global companies' acquire-or-die versus innovate-

or-die equation?

One innovate-or-die battlefield involves these companies' legacy

brands struggling to find relevance with younger consumers. Like a

dividing cell under the microscope, the American snack food market

has split apart into two distinct cells, each with its own unique con-

sumer DNA. The two market segments can best be defined as legacy

consumers and next-generation consumers. Legacy consumers are pri-

marily driven by indulgent satisfaction resulting from the consumption

experience, whereas the next-generation consumer (while indulgence

is important) is also driven by nonconsumption experience factors,

which play a decisive role in shaping their purchase and consumption

behavior.

Local craft (not Kraft) brands. Local sourcing. Responsible pro-

curement. Genetically modified organism (GMO) free. Environmentally

friendly packaging. Brand owners who signal the right virtues and link

their brands to social responsibility. These essential elements of next-

generation consumer DNA are not nearly a top priority for legacy

consumers—whose members largely seem content to continue to

impulsively grab n’go a favorite candy bar from time to time. And this

new mix of consumer behavior and preferences has presented a major

threat to other market monoliths, such as, for example, Mars Inc. No

matter how good their products taste, no longer could Mars hide

within the fortress of its all-too-famous secrecy, as it had for well over

half a century. While that may have been good enough for legacy con-

sumers, next-generation consumers simply will not tolerate it: they

want to know who they are dealing with. And to Mars' great credit,

they have aggressively opened up in recent years, proactively market-

ing a positive company and brand image to consumers through the

media and Mars' various sponsorships.

Another innovate-or-die battlefield is the fundamentally changing

retail environment. The core in-store merchandising mantra of the

chocolate industry over the past century has been “I see, I buy.”Some

studies show that 78% of consumers do not even walk down the con-

fectionery aisle when passing through a store. Chocolate is rarely a

planned purchase, and that is why chocolate companies aggressively

compete for chocolate display space on gondola ends and cross mer-

chandise in higher traffic areas, and there is a never-ending battle roy-

ale for the precious check-out counter rack. But with Walmart being

one of the largest grocery store chains in the country, as well as the

No. 3 online retailer, and Amazon.com's recent acquisition of Whole

DOI: 10.1002/tie.21996

Thunderbird Int. Bus. Rev. 2019;61:455–456. wileyonlinelibrary.com/journal/tie © 2018 Wiley Periodicals, Inc. 455