Ferrero USA outlook positive with Fannie May Confections acquisition - analyst

Ferrero said its market share is much smaller compared to leading US chocolate makers, such as Hershey and Mars.  Photo:©iStock/Authenticcreation

Ferrero is to acquire all the equity of Fannie May Confections brands, including its subsidiaries Fannie May Confections and Harry London Candies from 1-800-Flowers.com for $115m.

1-800-Flowers.com is one of the leading food and floral gift providers in the US. It also owns snack brands such as Cheryl’s Cookies and the Popcorn Factory.

Market analysts said Ferrero’s move resonated with a recent trend led by Russell Stover a couple of years ago, which is another example of a European premium chocolate company (Lindt) coming in to the US to buy a locally grown brand.

Jared Koerten, lead analyst at Euromonitor, said: “Ferrero is doing really well in the US right now, and it has a lot of room to grow both organically and through acquisitions.”

Ferrero USA’s chocolate candy box/bag/bar under 3.5 ounces posted dollar sales of $37.4m, which represents a 10.4% increase compared to the previous period, according to IRI’s data that includes total US multi-outlets with c-stores for the last 52 weeks ending Oct 2, 2016.

First acquisition in the US

A spokesperson at the Ferrero USA said this is Ferrero’s first acquisition in the US, and also the first time the company will own chocolate brands that are manufactured in the country.

This site previously reported Ferrero acquired Delacre biscuits by mid-December last year. Although the biscuits are sold in the US market, the spokesperson said that acquisition was completed in Belgium through an “affiliate of Ferrero,” instead of Ferrero International.

Fannie May currently operates a production facility in Ohio, and distribution centers in Ohio and Illinois.

President of Ferrero USA

The president of Ferrero USA, Paul Chibe  recently told ConfectioneryNews at the State of the Industry Conference hosted by National Confectioners Association in Miami, Florida, that all Ferrero's brands are performing well in the US market. 

He said: "consumers will continue to see quality and their palates will continue to refine, and I think that's a trend in confectionery as consumers are looking for premium and higher quality chocolate in the market place." 

Ferrero only has an industrial facility in New Jersey for packaging, assembly, and re-packing

“We were making Nutella for a couple of years at our New Jersey facility, but we decided to move our operations to Ontario, Canada, around early 2000 with the price of sugar being one of the contributing factors,” the company’s spokesperson said.

Following the acquisition, Fannie May will continue to be a separate entity, and it will not become part of Ferrero USA, she added. It will be a stand-alone entity under the Ferrero group.

“Ferrero will support the Fannie May operation in whichever way they could use help. It will remain that way for a number of years,” the spokesperson said.

Expanding footprints in premium chocolate and e-commerce

Fannie May is a premium confectionery brand primarily sold in retail, and its operations are in the Midwest, Ferrero’s spokesperson told ConfectioneryNews.

“Our brand is ‘class-for-mass,’ the affordable premium brand, so it’s a really nice pairing of companies that have likeminded values,” she said.

“Just because Fannie May is based in the Midwest, it doesn’t mean we have to keep it there,” the spokesperson added. “Eventually, we will make Fannie May a national brand.”

She mentioned Ferrero currently has much smaller market share in the regular US chocolate category compared to leading companies, such as Hershey, but its share is “decent” in the premium space.

“I think we might be number two after Lindt in the US premium sector.”

Under a strategic partnership after the deal is signed, 1-800 Flowers.com will have distribution rights for Fannie May, Harry London and certain Ferrero confectionery products in its e-commerce channels as well as in gift basket and towers sold into the club, food, drug and mass channels in the US.

Some of the Ferrero brands 1-800-Flowers.com will help distribute include Nutella, Ferrero Rocher and Raffaello, CEO of 1800-Flowers, Chris McCann, said.

Ferrero’s spokesperson said its current e-commerce sales are “nominal,” but she hoped the acquisition can help boost the company’s digital channel.

Stepping up seasonal sales

Analyst Koerten said the acquisition may also boost Ferrero’s seasonal sales as Fannie May is strong in the gifting confectionery space during Valentine’s and Easter.

“Ferrero overall doesn’t have a strong seasonal portfolio as some other companies like Lindt, which just acquired Russell Stover a few years ago,” he said.

So why not investing in snacks?

US chocolate market leaders Hershey and Mars have been tapping the ‘snackfection’ trend as the chocolate category has seen slow growth in recent years.

Ferrero's US market share

According to Euromonitor's latest data, Ferrero's market share ranked 6th in the overall US chocolate category, with Hershey the top brand in the market. Mondelēz ranked 8th in the category.

Those companies either developed snack SKUs of their big chocolate brands, or acquired smaller-scale snack brands.

Hershey, for example, acquired snacking chocolate brand, barkTHINS, before launching Cookie Layer Crunch and Cookie Layer earlier this year; M&M’s maker Mars also brought snacking chocolate brand, Maltesers, to North America in 2017.

So why did Ferrero choose another direction by continuing to invest in its existing segment?

“Ferrero is targeting a very specific segment of chocolate (premium), which has actually been doing pretty well,” Koerten said.

The difficulties Fannie May has recently experienced have made it an easy purchase target, he added.

“[Fannie May] had a big fire in one of its warehouse around Thanksgiving in 2014, right before the big holiday rush for Christmas. That sort of set the brand back, and they lost the whole seasonal sales around the holiday, as well as all the inventory,” Koerten said.

Acquiring a US brand is a ‘good thing’ under Trump presidency

According to a recent survey conducted by ConfectioneryNews, the majority of respondents working in the confectionery industry believe the Trump presidency will have a negative impact on their businesses.

President Trump has since signed an executive order to withdraw the US from the Trans Pacific Partnership (TPP), which won plaudits from the many union organizations, including the BCTGM, which represents 1,000 members at Mondelēz’s Nabisco plant in South Side of Chicago.

Ferrero-owned Tic Tac Mints previously denounced Trump’s “inappropriate and unacceptable” comments on women on its Twitter account.

Given the uncertainty of the global trade environment caused by Trump’s presidency, acquiring a domestic US chocolate company can “always be a good thing,” Koerten said.

Related News

Nielsen data shows Kinder is the fastest growing kids' confectionery brand in the UK.  Photo: Ferrero

Ferrero-owned Kinder secures licensing deal with Despicable Me 3

Kinder currently has zero presence in the US market.  Photo: Ferrero

Ferrero to bring Tic Tac gum and Kinder Joy eggs to US in 2018

The Nutella Café in Chicago is the first restaurant owned and operated by Ferrero.

Ferrero opens world's first Nutella Café in Chicago

Kopper's Chocolate will debut a brand new booth this year at the Summer Fancy Food Show in New York.  Photo: Nuts.com

Nuts.com acquires Kopper’s Chocolate in multimillion-dollar deal

The development of Moose Munch in partnership with Nestlé is among Harry & David's recent moves to become an everyday brand. Pic: 1-800-Flowers

1-800-Flowers set to compete with Amazon with new snacking brand

It's Sugar reported net revenues of $78.4m for the past 12 months ending April 30, 2017.  Photo: It's Sugar

BBX Capital acquires specialty candy retailer It’s Sugar for $57m

Delacre is part of Yildiz Holding's United Biscuits and sells mainly in France and Belgium. Photo: Delacre

Ferrero aims to ease North America struggles by acquiring Delacre: Analyst

Ferrero to invest USD $27.66m in three new production lines by August 2017. ©iStock/Authenticcreations

Ferrero Canada plans three new products at Brantford site

Delacre can give Ferrero a foothold in North America outside chocolate, says Euromonitor.  Photo: iStock/Authenticcreations

Ferrero expected to acquire Delacre biscuits by mid-December

Ferrero ups sustainable cocoa and sugar purchases as it aims to source both ingredients solely from sustainable sources by 2020. Photo: Fairtrade

Ferrero to double Fairtrade cocoa purchases

Ferrero France posted revenues of $1.3bn in 2016. ©iStock/Zoha Nve

Ferrero to modernize French factory in $42m project

Kids in Romania allegedly produced toys for Kinder Eggs, claimed investigation by The Sun newspaper. ©iStock,/Ekaterina Minaeva

Ferrero drops Romanian Kinder Egg subcontractor amid child labor concerns

Tic Tac said Trump's comments are 'inappropriate and unacceptable' Photo: Ferrero

Ferrero-owned Tic Tac Mints denounces Trump comments

Counterfeit Western chocolate brands such as Ferrero Rocher seized by Chinese police. ©iStock/Authenticcreation

Fake Ferrero and Mars chocolate seized in China

Tying smaller confectionery portions to particular eating occasions - such as an in between meals snack -  helps consumers feel fuller: Ferrero. ©iStock/OmegaTransFer

Portion control among ‘most cost effective’ ways to tackle obesity: Ferrero

Mondelēz may pursue #4 US chocolate firm Ferrero as a Hershey alternative, says Mintel analyst Photo credit: Zoha Nve

Mondelēz may move for Ferrero after Hershey saga: Mintel

NCA's State of the Industry Conference took place in Miami, Florida earlier this week. Photo: ConfectioneryNews

Premium & healthy snacks: Mars and Ferrero execs chew on 2017 US confectionery trends

Mondelēz, Nestlé and Ferrero are gaining share in China's challenged confectionery market.  Photo: ©iStock/celafon

Hershey and Mars lose China market share to Nestlé and Ferrero

Kinder Surprise eggs accused of featuring a 'commercial hook'

Shell-shock: Ferrero disputes ‘hook’ claim as Chile bans Kinder Surprise eggs

Major indsutry players say stand-up pouches are intended for sharing, but are working towards clearer labeling on portion sizes.  Photo: iStock/Sirisako

How can share bags fit confectioners’ portion control strategy?

Major confectioners ready to discuss Europe-wide calorie cap on portions. ©iStock/piotr_malczyk

Confectionery industry open to pan-EU 250 calorie cap per portion

Related Products

See more related products

Submit a comment

Your comment has been saved

Post a comment

Please note that any information that you supply is protected by our Privacy and Cookie Policy. Access to all documents and request for further information are available to all users at no costs, In order to provide you with this free service, William Reed Business Media SAS does share your information with companies that have content on this site. When you access a document or request further information from this site, your information maybe shared with the owners of that document or information.