Although this proposed merger very obviously
represents major development in the overall confectionery/candy industry, it
appears that combination is essentially vertical in terms of each company's
primary strength. Wrigley, of course, is the world's iconic leader in the gum
segment of the confectionery market, while Mars remains among the top-tier
players (U.S. and internationally) in the chocolate confectionery segment,
along with Cadbury, Nestlé, and of course Hershey.
Market share data seems to vary greatly depending on source,
geography, and segment.
This 2004 Leatherhead Food report teaser offer probably the
best encapsulation of the candy market in terms of competition:
"Mars represents the world’s leading
supplier in terms of confectionery sales, with revenue exceeding USD8bn in
2002. Other leading companies include Nestlé and Cadbury Schweppes,
which has strengthened its position through the acquisition of the former Adams
operations."
"The global confectionery market remains fragmented,
with the leading 6 manufacturers accounting for less than 45% of value sales
between them. The market’s leading suppliers are Mars, Nestlé and
Cadbury Schweppes, which together account for almost 30% of value sales."
"In recent years, the global confectionery industry has
been characterised by a spate of merger and acquisition activity. Within the
last few years, most of the industry leaders – such as Cadbury Schweppes,
Nestlé, Wrigley and Kraft – have all made significant acquisitions,
while acquisition activity has also occurred amongst some of the
industry’s smaller players."
The chart below clearly illustrates the international
market's fragmentation in each segment, and particularly the literal absence of
significant competition between these two companies in their respective areas
of strength (Chocolate vs. Gum):
Market share in the global confectionery market (US$
share)
| |
Global
confectionery
market |
Chocolate |
Gum |
Candy |
| Cadbury Schweppes |
9.9% |
7.5% |
25.7% |
7.2% |
| Mars |
9.0% |
14.8% |
– |
3.0% |
| Nestlé |
7.8% |
12.6% |
0.1% |
3.2% |
| Wrigley |
5.8% |
– |
35.9% |
2.7% |
| Hershey |
5.5% |
8.2% |
1.1% |
2.7% |
| Ferrero |
4.4% |
7.3% |
– |
1.5% |
| Kraft |
4.3% |
7.7% |
0.1% |
0.4% |
In the U.S., Hershey currently possess roughly 29% of the
overall confectionery market, and this will be surpassed in broad market share
as a result of this combination. However, it can not be emphasized enough that
the companies products are basically complimentary with respect to the
confectionery market, and only the broadest possible interpretation of the
market could draw any sort of serious antitrust scrutiny. This is extremely
unlikely to happen in this particular situation.
The following chart provides recent (2007) market share data
for the U.S. candy/confectionary industry. Note that this particular data
indicates the combined entity will surpass Hershey by .1% for all domestic
candy sales in the United States:
(Source: 2008 National Confectionery Association resource
guide.)
In sum, despite the enormous, long-term magnitude of this
deal to the candy industry, there is simply no way it can actually be labeled
anti-competitive or problematic from a regulatory perspective. As such, it is
very likely the companies will clear the various regulatory hurdles with very
little, if any, delays and should be able to complete the transaction in about
a four-month time frame.