Campbell Soup Co. may no longer want upmarket chocolate business Godiva but with demand for more expensive chocolate rising, there is likely to be a fierce battle for the business. Dean Best reports.

When a well-established, premium brand in a growing sector looks set to be put on the block, there is certain to be speculation about who will be in the hunt.

And, despite questions being raised in certain quarters over the outlook for consumer spending, there is likely to be no shortage of bidders for upmarket chocolate business Godiva.

Godiva could soon be in new hands after current owner Campbell Soup Co. admitted last week that it is mulling the brand's future.

Godiva chocolates are sold through namesake retail stores, specialty retailers, department stores and on the Internet, and do not appear to be part of Campbell's future plans.

Campbell is considering its options for Godiva because it believes the business does not fit with its strategy of focusing on "simple meals", including soup-based snacks. The US company, which has recently embarked on an offensive into the soup markets of Russia and China, wants to focus on more everyday products.

A brand with such a well-known, premium image in the minds of consumers is likely to command a hefty price tag, and analysts have valued Godiva at as much as US$1bn. There is no doubt that Campbell would love to plough that cash into its assault on the Russian and Chinese soup markets.

Last month, Larry McWilliams, the head of Campbell's international business, told just-food that the Russians and Chinese are "very emotionally involved in soup". Campbell's apparent readiness to sell Godiva - despite research pointing to the growth in the premium chocolate sector - shows where the US group's emotions lie.

But where does Godiva's future lie? Despite concerns over consumer spending and a relative drought in M&A activity due to the recent turmoil in the credit markets, analysts believe there could be a number of bidders for Godiva.

After all, premium chocolate is the growth engine in the confectionery market at the moment. Consumer research group Packaged Facts has said that strong consumer interest in the reported health benefits of dark chocolate and a general trend towards product premiumisation, including organic and fairtrade products, are the main drivers behind the growth in the category.

The US market for chocolate, for example, is forecast to grow from $16bn last year to $18bn by the end of 2007, according to Packaged Facts, with premium products driving the growth. The research group says that the market share for premium chocolate increased from 13% of the total market in 2002 to nearly 17% last year. Packaged Facts estimates that premium chocolate sales will continue to expand, commanding 25% of the market by 2011 and generating $4.5bn in sales.

With dairy costs also on the rise, a premium chocolate brand like Godiva, and one which has a long-standing upmarket image among consumers, will be attractive to producers looking to offset rising raw material bills with more expensive products.

These trends suggest that there is likely to be a competitive auction for Godiva. US confectionery giant Hershey, Swiss chocolate group Lindt and even the likes of Coca-Cola Co. and luxury goods group LVMH Moet Hennessy Louis Vuittion have been named as possible buyers.

So far, however, Nestlé is the name on the lips of a number of industry watchers. Nestlé is said to be looking to expand its "super-premium" chocolate offering and is reckoned to be well placed to stave off rival interest.

James Amoroso, an analyst at Swiss broker Helvea, dismisses "out of hand" that "non-chocolate consumer companies" like Coca-Cola Co. and gum giant Wrigley would put in serious bids.

"Nestlé is going to buy it - full stop," James Amoroso, he tells just-food. "Nestlé's strategy is to get into premium chocolate; [Nestlé CEO Peter] Brabeck has said it's where the company would like to take the business."

Lindt has expressed an interest in buying Godiva, although Amoroso believes the probability of the Swiss group snapping up the business as 0.1%. "Godiva was a topic in the mid-90s but Campbell didn't want to sell," Amoroso says. "Subsequently, Lindt USA started its own store network, and bought Ghirardelli and Caffarel. Now Lindt has almost more growth than it knows to do with."

David Palmer, an analyst at UBS Investment Research in New York, believes that "Nestlé and Hershey are at the top of a small list". But, like Amoroso, Palmer appears to see Nestlé as the favourite to land the company. "Nestlé is huge; it could certainly outbid anybody," he adds.

Nestlé, for its part, has refused to be drawn on the speculation. However, all eyes will be on the Swiss food giant tomorrow (15 August) when it publishes its first-half results to see if it gives any indication of whether it would pounce for Godiva.