Last week Perfetti van Melle completed its acquisition of Mondelez’s US, Canadian and European gum businesses. Perfetti paid US$1.35b and acquired a plethora of brands including Trident, Dentyne, Stimorol and Bubbalicious.
Perfetti has annual revenues just shy of €3b, so this acquisition is very substantial. Managing the integration from an operational and commercial perspective will be key. Perfetti is already in 150 countries and has over 17,500 employees.
Perfetti is also privately owned and as I understand it many decisions remain highly centralised. Likely it will be a very different culture to Mondelez!
Gum is a highly profitable and well-managed business. This is not a distressed purchase so Perfetti will be challenged to make the economics work, at least in the short term.
Perfetti’s acquisition of gum adds neatly into its sugar confectionery portfolio. Methos, Frisk and Chuna Chips are its most well known brands. Notably, gum is category where private labels are not strong. It is also a category where there is less price discounting, unlike other sections of the grocery aisle.
Perfetti is used to playing a long game. It does not have to present quarterly results to the stock market. Chupa Chups was a long bet placed back in 2006 for less than $500m.
Sales of gum is strongest in high traffic customers like convenience stores.
There shoppers spend milli-seconds deciding what to pocket; display at or close to the check-out is critical.
Mondelez knows a lot about the check out and shopper conversion. So Perfetti isn’t just buying brands but also shopper marketing know-how and a strong route to market model.
The other big global player in gum is Wrigley now owned by Mars. Mars spent $23b on that purchase back in 2008.
Mars is also no stranger to the hot spot and its role in the shopper’s path to purchase.
In my first job at Nestlé Rowntree in York, I worked in market research focusing on in-store merchandising, hotspot and planogram design. At that time we calculated that up to 70% of our sales were made on impulse, meaning control of the retailer’s shelves and hot spots in particular was one of the most important factors.
Mars then was a formidable and almost feared competitor in this space. Since then their capabilities have jumped leaps and bounds.
Arguably Perfetti’s biggest competitor is the regulator. Governments, especially in the West, are hell-bent on fighting a war against sugar and companies targeting children. Categories like gum, candy and sugary sweets are firmly in their headlights.
Every time I go back to the UK I realise how much space has shrunk in retail for these products.