Although the Hershey battle is over, Wrigley has admitted it’s looking for other targets to bolster its position in the confectionery industry. Wrigley is the leading gum player with a 50% global market share, but it wants to expand into chocolate. As the confectionery industry consolidates into a handful of giants, Wrigley would do well to establish itself among this concentrated group.
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The chocolate confectionery market is currently very stable in Western markets with intense competition between players being driven by the desire for market share. The chocolate industry is already highly concentrated and the intense interest in the Hershey sale demonstrates that the top players are keen to consolidate further.
Two forces are driving the need for consolidation. Firstly, the slow rate of growth of the food industry in developed markets. Although people are spending more on food, the majority of this growth is taking place in foodservice outlets rather than the grocery channel.
Secondly, retailers are becoming ever more powerful players, increasingly dictating to manufacturers the terms on which they can sell their products. The growth of private labels has also hit manufacturers’ margins, forcing mass-market brands to compete on price.
As a result of these forces more companies are concentrating their activities in categories where they can be the number one or two player. Wrigley clearly sees itself as one of those key players in the confectionery industry. However, it needs to acquire a suitably large chocolate manufacturer to fill the gap in its confectionery portfolio.
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By GlobalDataThe question is whether or not Wrigley will be able to find such suitable targets following the collapse of the Hershey sale. Although Wrigley is reportedly eyeing up chocolate manufacturers Lindt and Barry Callebaut, they will not bring the same scale of benefits as embarking on the Hershey highway could have.
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