Candy Land Tremors While Giants Dance

Implications: The recent Mars Wrigley courtship is sending veritable tremors ripple across candy land.  Cadbury’s and Hershey’s have to quickly figure out their response to the changing topography.  The more agile mid-market sector will find opportunities to advance their businesses while the smaller and keener innovators will likely take advantage of the market confusion to position themselves for the reactive round of acquisitions. 

Analysis:  When Mars offered $23bn to buy Wrigley’s it also provided assurance to the markets with the financial buffering (no pun intended!) from Warren Buffet.  Mars gets to supersede Cadbury’s in the fastest growing confectionery market while Wrigley’s gets to upgrade its status in candy land.  Wrigley also gets $1bn if Mars decides to abandon this deal.   

While the deal appears elegant, in reality it's as clumsy as elephants dancing among swans.  Mergers of this size require superb stewardship and the relevant competence of current management at Mars and Wrigley’s is debatable.  Mars’ spate of plant closings and layoffs in recent years implies the management has still to figure out its own business.  One thing is certain: confusion and insecurity are rampant within both companies regarding titles, jobs and responsibilities and are bound to trigger an exodus from all ranks into safer realms.  Mergers are scary at all times – particularly so, during economic times like now.   

Regulatory issues on both sides of the ocean will take at least 12 months to clear before the marriage can be declared an unqualified success.  Time is money.  While Mars and Wrigley spend time figuring out their optimal fit, the competition will likely merge and acquire to be on par with the evolving giant.  The time is right for Cadbury’s to sort out its drinks and confectionery businesses and take advantage of the market distraction to hone its offerings and market share.  The time is equally right for Hershey to examine the implications of the looming deal and re-visit its philosophical stand and strategies in the marketplace.  For the mid-market sector, this is the perfect time to dress up and upgrade their offerings – just so they get invited to the candy ball!