Dave West, raised eyebrows last week with his decision to, well, head west and leave his post as Hershey chief executive for the top job at Del Monte Foods. But will Hershey’s fortunes head south in the wake of West’s departure?
The US confectioner’s shares dropped after the announcement and, although some on Wall Street were keen to cool concerns over the company’s prospects, questions will be asked about the group’s outlook.
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Any sudden departure – especially by a CEO – raises questions. When you throw in Hershey’s revival under West – and the ongoing debate over the influence that The Hershey Trust has on the company – there will be plenty for investors to chew over.
The Trust holds 80% of the voting rights in Hershey and there is the feeling among analysts that it dominates company strategy. The exact reasons for West’s decision to leave are unclear – he spoke in a short statement of wanting a new challenge – but he may have grown disenchanted over the influence of the Trust. Rick Lenny, West’s predecessor, was said to have decided to leave Hershey in 2007 due to frustration over the company’s ownership structure.
Under West, Hershey enjoyed faster sales growth and better margins and his exit does bring some uncertainty to a resurgent business. COO J.P. Bilbrey, West’s replacement on an interim basis, has been touted by some as a potential permanent successor, which would likely be welcomed by investors.
However, whatever the identity of the new chief executive, the position of the Trust will remain critical to Hershey’s future growth – particularly in overseas markets, which some believe are vital to the company’s long-term prospects. Some see the Trust as a block to Hershey’s international ambitions and, while West was able to breathe fresh life into Hershey’s business in the US, it will likely be outside the company’s domestic market that determines its future.
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By GlobalDataHershey’s presence in Denmark is likely to be small – but for the confectioners, snack makers, dairy processors and meat firms present in the European country there is a cloud on the horizon – and a cloud that we analysed in detail last week, much, it appears, to your interest.
Denmark plans to bring in a tax on food high in saturated fat later this year. The Danish government claims the tax will help consumers follow a healthier diet but, unsurprisingly, the food industry has been vocal in its criticism.
However, Denmark’s plan is attracting attention from neighbours mulling similar taxation. Finland, like Denmark, taxes sugared products and the country’s finance minister has called a levy on saturated fat “the logical next step”.
Food groups opposed to Denmark’s plan, however, could find friends in Brussels. If opponents of the tax launch a formal complaint to the EU, the European Commission is obliged to check if the levy breaks trade regulations. Nevertheless, with a similar levy on sugar in place, it seems uncertain whether Brussels would rule that the sat fat tax violates EU law.
And northern Europe is proving to be the source for one of the key ongoing M&A stories in the food retail sector. Last week, the go-ahead for the sale of a 67% stake in UK frozen-food retailer Iceland Foods was given.
Failed Icelandic bank Landsbanki decided to launch the process to sell the stake in a retailer that, even though it has seen its sales growth slow in recent months, has enjoyed a successful economic downturn.
Malcolm Walker, Iceland Foods’ chief executive and owner of 24% of the business, told just-food in March that the retailer would look to NPD in the frozen category to boost sales and, crucially, open more stores to build its share of the UK market.
Last autumn, Walker was reported to have bid GBP1bn (US$1.61bn) for the retailer. Reports last week said Landsbanki is looking for GBP1.8-2bn. A source familiar with the situation told just-food that the disposal of Landsbanki’s stake in Iceland Foods was “by no means a fire sale” and the bank was looking for the best price possible.
The sale is likely to attract wide interest. Sainsbury’s has already reportedly indicated it would take a look at Iceland Foods once Landsbanki begins the sale process. Last week, The Co-operative Group – which we revealed was in talks to buy a number of smaller retailers as part of its expansion plans – said it would not be interested in the whole of Iceland Foods but would consider individual sites. And, over the weekend, Morrisons was reported to be preparing a GBP1.5bn takeover bid.
It is certain to be one of 2011’s more interesting takeover sagas.
