Chocolate confectionery - 1 Flashcards
What is Divine chocolate and how was it formed?
- In 1998 the day chocolate company was started by the farmers of the Kuapa Kokoo co-operative in Ghana which is supported by comic relief.
- The first product to be produced was Divine chocolate, a fairtrade product which was aimed at the mainstream market.
- In 2007 the Day chocolate company changed its name to Divine chocolate.
- Divine chocolate is a social enterprise.
What was the chocolate confectionery market structure like from 1998 - 2008?
- 7 manufacturers dominated the global market for chocolate in 1998, but the market was fragmented with lots of traditional businesses which had grown organically or through takeovers and mergers.
- Mars, nestle, kraft foods, Cadbury Schweppes, Hershey, Ferrero, lindt were the main manufacturers.
What is the chocolate confectionery market structure like in 2017/18?
- After a period of consolidation with large MNCs taking over and swallowing up many of the smaller manufacturers, the market has become even more concentrated.
- Mars, Mondelez (formely Kraft, changed name and also now owns Cadbury and Green & Black’s), Nestle, Ferrero (owns thorntons) and Hershey
Why is the chocolate confectionery market polarised in 2017/18?
- In 2017/18 the global chocolate confectionary market is polarised.
- At one end the huge MNCs with billion dollar revenues dominate the market and grow through mergers and acquisitions of brands and smaller companies.
- At the other end of the market there is a thriving industry of many small bean-to-bar artisan chocolate makers who are catering to niche market tastes.
- Low barriers to entry mean that anyone can start a chocolate business in their kitchen and eventually scale it up – growing organically.
What is an example of a hostile takeover?
- A hostile takeover is when the target company (Cadbury) does not approve of the buyout (by Kraft) and fights against the acquisition.
Why did Cadbury buy Green and black’s?
- MNCs have to keep growing or the investors will leave and take their money with them.
- Giant MNCs now look to buy ethical, small scale niche products to improve their brand portfolio and their green credentials.
- In 2005 Green and Blacks was the fastest growing UK chocolate brand with the worlds first organic chocolate bar.
How did the takeover of Cadbury by Kraft occur?
- August 2009 Kraft launched a hostile takeover bid for Cadbury.
- After 6 months of bids by kraft which were rejected by Cadbury for being too low, finally in January 2010 Kraft bought Cadbury for £11.5 billion.
- Shortly after assuring the UK government that no jobs would be lost, Kraft shut the Somerdale plant near Bristol with 400 UK jobs lost.
Why did Kraft want to buy Cadbury?
- Cadbury had a large global presence with strong competitively advantaged positions in high growth emerging economies.
- 2008 Cadburys dairy milk was the no1 chocolate bar in India, Mexico and South Africa.
- Cadbury had well invested supply chain.
- Cadbury had a portfolio of strong brands.
Why did Ferrero buy Thorntons for £125m?
- Thorntons had been struggling for a while and had tried selling into supermarkets and expanding into ice-cream to prop up sales.
- Ferrero the Italian company bought thorntons to help expand into the UK.
- This brought together 2 complimentary businesses and allowed Ferrero to gain more UK market share.
- Some speculate that Ferrero bought thorntons as a way to avoid high tax in Italy because it could move more production to the UK.
Why did Hershey reject the Mondelez bid in 2016?
- Hersheys board rejected a $23billion offer mondelez.
- Hersheys trust (who have 80% of the shares) rejected the bid as being too low.
- Mondelez wants Hershey for its 88% of the N American market allowing it to get a foothold in the lucrative US chocolate market.
- Mondelez revenue = $29.6 billion.
- Hershey revenue = $7.4 billion.
What tactical reasons can cause takeovers?
Tactical – attempt to ensure increased market share:
- Examples of this is in 2015 Mars bought Mexican business grupo turin.
- This gave mars a foothold in the premium chocolate market, a new market for the business and one that it was critically missing.
Tactical – access to technology, staff or intellectual property:
- A business may takeover or merge with another business in order to gain access to patents.
- In the chocolate industry this could be anything from a secret ingredient in a chocolate bar to the colour of the packaging.
- E.g. Cadbury won right to the colour purple and invention where chocolate doesn’t melt.
What strategic reasons can cause a takeover?
Strategic – access to new markets:
- Kraft bought Cadbury as a way into the emerging markets of india, south Africa and mexico.
- Cadbury dairy milk held number 1 or 2 positions in 7 of the top 12 emerging markets.
- In 2008 cadbury dairy milk held 11% of global market share in emerging markets.
