Is Candy Recession Proof?

Implications: Is Candy Recession Proof?   Wm. Wrigley Jr. Co. Executive Chairman Bill Wrigley Jr., and Mars Inc. CEO Paul Michaels, bolstered by Warren Buffet, the Oracle of Omaha, certainly think so.  The two confectionary powerhouses are betting consumers will buy candy and lots of it during down times.    Mars Inc. is buying Wm. Wrigley Jr. Co. for about $23 billion in cash.  The deal would marry brands with iconic position in the lives of Americans and candy lovers around the world.  Mars, which owns m&ms and Snickers and Wrigley with Big Red, Juicy Fruit, Eclipse, Orbit, and Extra fit right in Warren Buffett's sweet spot.  The Chicago based family owned gum maker would become a subsidiary of the McLean, Va.-based and family owned Mars.  

Analysis:  The buyout still has to obtain regulatory and shareholder approval.   The new conglomerate would overshadow UK’s Cadbury Schweppes – the world's largest confection maker and probably trigger a wave of candy industry consolidation.  The merger would create a true global confectionary powerhouse with the #1 place in chocolate and chewing gum in both, developed and emerging markets.  This is a good time for the Hershey Co., struggling with flattening sales and rising commodity costs since late 2006, to make the necessary moves to take advantage of the cracks in the marketplace.     

The rest of the candy world can look forward to some breaks in the marketplace and some opportunities to establish their presence in niche and not-so-niche areas.   The two companies, without a doubt, will take more than a year to coordinate their sales, marketing and distribution systems to reap the benefits of economies of scale.  This will also open up a significant window of opportunity for small and innovative candy makers. Some brands may be ripe for the picking by other groups.  Family ownership has allowed Mars, to account to none but themselves and creating their own standards that the company touts to be superior to what the rest of the world adheres to.  The merger is bound to shake the paradigms of Fair Trade and standards for chocolate in the chocolate world.