Hershey chief executive Dave West has revealed that the US chocolate maker is “actively” looking at ways to grow its international business through mergers and acquisitions.
The company’s overseas strategy has been called into question after Kraft Foods’ acquisition of Cadbury, with some commentators asking whether the Reese’s maker has the scale to compete.
However, the Hershey boss defended the company’s overseas strategy and said he believed organic growth was “enough” to keep the business competitive internationally.
Nevertheless, West said the company would look at growing through M&A and further partnerships outside the US.
West told the CAGNY investor conference in Florida that the “fragmented” nature of the global confectionery market meant there was an opportunity for Hershey to expand through mergers and acquisitions.
West said “most” markets were “unconsolidated”, with the three largest players accounting for less than 50% of global confectionery sales.
“Opportunities to add to the business via M&A certainly exist,” West said yesterday (16 February). “We will take our global brands, our know-how and our learnings, and strong balance sheet and cash-flow to actively look for opportunities.
“Our willingness to partner, where it makes sense, in the face of a category undergoing global change will give rise to many options.”
The Hershey president and CEO admitted the company was “late” in expanding outside the US but stood by the company’s strategy.
West pointed to Hershey’s ventures in Mexico, India and China and said the company had been able to take its US brands overseas and benefit from “local jewels” in Mexico and India.
“Our international strategy is working. Our assets and capabilities are extendable. We have a strong stable of global brands, as well as acquired local jewels,” West said.
He also insisted that different local regulations on what chocolate can contain precludes global procurement and means manufacturing is carried out regionally. The varied tastes of consumers meant R&D had to be “customised” locally, West explained. He added that few retailers were “truly global customers”.
West said: “Global scale brings competencies but, frankly, these advantages in practice are often more relevant on a regional basis.”
However, he added: “The question has been asked: ‘Is organic growth enough to be competitive for the long term?’ We believe it is but it is not the only option.”