Monday, April 28, 2008

Gum is from Mars Mars Inc., the privately-held maker of Mars bars, Snickers, M&Ms, Skittles, and Three Musketeers, announced it would purchase Wm. Wrigley Jr. Co., the world's #1 chewing gum company, in a $28 billion deal. Mars, which is already the #1 seller of chocolate bars, will become the #1 confectioner in the world, beating out rival Cadbury. These are two venerable companies. chcolate maker Mars is 98 years old, while Wrigley (the maker of Double Mint, Juicy Fruit, Orbit, and LifeSavers) is 117 years old. The gum business is growing faster than chocolates, and the margins are higher. (Incidentally, Mars is, pre-deal, even slightly bigger in pet food than in candy, Cadbury, which bought Adams Gum from Pfizer in 2003, is the second largest chewing gum maker, with such brands as Trident and Dentyne. The deal has stoked the rumor mill about even further consolidation in the industry, Cadbury, which is in the course of spinning off its Schweppes beverage division, is cash-rich, and some kind of a deal with Hershey may be in the works. As a story in The Telegraph ("Mars and Warren Buffett in Wrigley deal," 4/29/08) notes: "A deal between the pair would make sense, because Cadbury lacks any form of strong presence in the US, while Hershey does not have the global reach which Cadbury is known for." Involved in the deal is Warren Buffetf;s Berkshire Hathaway, which will put up $4 billion in return for a share in the Wrigley division. Chances are it's a great deal. It is generally considered to be a good move to be in the candy industry during a recession People may stop buying wine, furs, and cards, but they'll always splurge on candy. In addition, unlike an airline, a bank, or a Yahoo, these are concrete buys with long histories of profit and immense brand acceptance. And since both companies deliver to the same set fo resllers and sell products in the same price ranges, there are real chances of synergy in sales, distribution, and development. 10:09:22 PM

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