Is M&A The Recipe For Bringing The Bite Back To Biscuits?
The UK biscuit industry is crumbling; slowing sales, intense competition and an increase in the price of sugar and wheat have hit the sector hard. Not to mention the pressure from the vast range of new and healthier products that are available. As a result, the UK sweet biscuit market, valued at £1.9bn, is experiencing a flurry of deal making.
One move biscuit companies are making is into the health market. In 2015 the Belgian company Lotus Bakeries, renowned for its caramelised biscuits, purchased the majority stake in Natural Balance, the UK company that owns the Nakd health bars brand, as well as acquiring Urban Fresh Foods, the producer of Urban dried fruit and Bear fruit snack bars in a £70m deal.
Fox’s loses its appetite
Fox’s Biscuits, producers of Rocky, Party Rings and Ginger Crunch Creams to name but a few, has struggled to hold on to their market share of the UK biscuit industry, which has dropped more than 25 per cent over the last five years to just 4.9 per cent. The slowing sales have prompted parent company 2 Sisters Food Group to consider selling Fox’s, valued at around £350m. As the UK’s third largest biscuit company, Fox’s would be an ideal target for a fellow biscuit giant looking to expand. Possible buyers could include Burton’s who, while being smaller than Fox’s, owns popular brands including Wagon Wheels and Jammie Dodgers.
While the UK market has endured headwinds over the last couple of years, the global biscuit market remains strong. Mondalez, the Illinois-based multinational confectionery, food and beverage company, has made a firm stance in the UK market. Mondalez’s acquisitions of companies such as Cadbury have opened up new areas for the American company. In 2016 it purchased the licence to produce Cadbury’s chocolate biscuits from biscuit company Burton’s, and its vast portfolio includes popular biscuit favourites such as Oreo and Chips Ahoy! as well as healthier brands including belVita. Modalez was almost non-existent in the UK market in 2007, but last year the company held 10 per cent of the UK market share.
Biscuits will always remain a hot commodity, however the pressure from healthier snack alternatives has had a significant impact on the sector. The margins on biscuits are exceptionally good, and the industry is extremely profitable for those who can challenge the competitors and make it a success. Over 2017, we expect to see more M&A activity in the biscuit sector, which will hopefully give UK biscuit companies the pick-up they need.
Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.