Everyone wins in Mars-Wrigley deal – Even Cadbury

Major news in the confectionary world this week as details emerged of the takeover of the Wm. Wrigley Jr. Company by Mars Inc.

The merger, which could take six to twelve months to close, will see Mars paying $80 cash for each share of Wrigley stock in what amounts to a $23 billion deal.

The combined Mars and Wrigley will now overtake Cadbury as the world’s biggest confectionery company, with an estimated global market share of 14.4 per cent.

The deal is hopefully particularly good news for Wrigley, which has not been able to fully leverage its brands in the past and could profit from the size of Mars and its strength in innovation. Last year Wrigley conceded 3 points of gum share to Cadbury, thanks to growth in new products such as gum proposing dental benefits.

In a roundabout way, Cadbury probably also profits from this deal: its biggest rival bidder for Hershey is likely out of the picture for good. A new offer from Cadbury seems likely now that Wrigley (who came close to buying Hershey in 2002) is out of the way.

Layoffs planned as FMCG companies slim down

With increasing focus on paring down portfolios to core growth products and on maximizing production efficiency, FMCG companies are announcing restructuring, factory closures and significant layoffs.

In recent memory: Premier Foods, Johnson & Johnson, Cadbury.

And today Unilever announces a move to regional operating companies (merging over 100 nation head offices into around 25 “multi-country” head offices), the closure of up to 60 factories, and the cutting of up to 20000 jobs over the coming four years.

A few weeks ago when Unilever announced the merger of its Dutch and Belgian organizations, I asked for larger steps and braver thinking. Today’s announcement shows that thinking is there.

It has to be. Maximising efficiencies means maximizing available revenue that can be pumped back into brand development and support (=growth) and into shareholder value. In today’s market, only the leanest players are going to survive.