Sweets & Confectionery

Ferrero and Mondelez: Two Front Runners to Buy Arnott’s

Anyone who wants to buy Campbell Soup's Australia-based Arnott's cookie brands - with a field presumably led by Mondelez and Ferrero - has less than three weeks to submit bids

Campbell has been having a rough time financially and otherwise. Last year, former CEO Denise Morrison abruptly resigned, Daniel Loeb’s activist hedge fund Third Point took a $300 million stake in the company and it announced the planned divestment of both its Fresh division and international brands. Arnott’s is the first international brand on the chopping block. The Australian Financial Review reports it is the largest biscuits player in Australia. With $737 million in annual sales, it sells more than six times the next biggest competitor, Mondelez.

COMPETITION BETWEEN MONDELEZ AND FERRERO

It’s no surprise that Mondelez is taking a good hard look at acquiring this brand, thought to be up for sale for about $3 billion. Last year, Mondelez — the owners of Oreo, Chips Ahoy and Nabisco — spent about $500 million to purchase Tate’s Bake Shop, best known for its premium bagged chocolate chip cookies, to dominate US cookie aisles. Arnott’s, best known to Americans as the maker of Tim Tams, could give the snacking giant the same advantage in the Asia-Pacific region. Italy’s Ferrero is a more interesting candidate for the acquisition, since the company is currently more heavily invested in sweets than snacks. The parent company of Nutella, Kinder and Tic Tac has recently invested in several US-based candy deals, including the purchase of Ferrera Candy and Nestlé’s US confectionery business.

FERRERO LOOKING FOR GROWTH

Still, there have been hints that Ferrero is looking outside of candy for growth. In addition to being a front runner for the bidding war for Arnott’s, Ferrero reportedly placed a preliminary bid of more than $1.5 billion to acquire Kellogg’s Keebler, Famous Amos and fruit snacks businesses in January. Perhaps this change in course is an indication that Ferrero is looking to tap into the growing and lucrative snack market. If that’s the plan, Kellogg’s brands would be an ideal method to increase a foothold in the American snacking sector, while Arnott’s would be a way for the company to expand its global footprint.

THE GROWTH OF ARNOTT’S

At the same time, as evidenced by Campbell’s latest earnings report, Arnott’s as a brand is growing. Sales in Campbell’s global biscuits and snacks division, which is dominated by Arnott’s, grew from $708 million in the first quarter of 2018 to $1.24 billion in the first quarter of 2019. Despite this growth, this divestment is intended to tighten Campbell’s portfolio and give the company a clearer direction as it works to get its core divisions back on track. By doing so, the company hopes to have $945 million in cost savings by fiscal year 2022. Campbell Soup is moving quickly, announcing the sale of refrigerated soup brand Garden Fresh Gourmet and a refrigerated soup factory for its Fresh division just last week. By fast-tracking these divestitures, Campbell seems to be making up for lost time as it reorients itself to focus on areas with more significant expertise.

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