Who will buy Godiva Chocolatier from Campbell Soup ?
- August 09, 2007
||strategic alternatives being explored for subsidiary, August 2007;
||Godiva Chocolatier (originally Belgium), worldâs leading luxury chocolate business esp. in US;
||candidates include Nestle, Lindt and LVMH;
||Campbell Soup Company (USA), global producer of simple meals and vegetable beverages;
||focus on core categories, timing;
||diversifying luxury portfolio ?;
||Godiva is sold through its own or franchised boutiques, finer department and specialty stores.
Shortly after Campbellâs announcements, news emerged that Lindt & Spruengli, the Swiss chocolate maker, was looking at this deal. Nestle has also been widely touted as a serious candidate. Other chocolate majors like Cadbury and Hershey have also been mentioned. In our view, the luxury business model followed by Godiva makes it incompatible with even the most premium of mainstream chocolate producers, and so Campbell will end up either selling it to a luxury goods group like LVMH or, more likely, to a lesser known candidate for a disappointing valuation.
The surprise here is that Godiva finds itself in Campbellâs portfolio in the first place. The artist Andy Warhol immortalised the Campbell soup brand, in 1962, as an icon of mass consumerism. Itâs ironic therefore that the group should also be the owner something as un âmass as a $500 mln annual turnover luxury brand.
Interestingly, the acquisition was made as far back as 1966. In those days, diversification was in vogue, and luxury chocolate certainly represented a diversification from everyday soups. Or maybe Campbellâs management at the time were fed up with being labelled as a mass producer, in the aftermath of Warholâs pop art stunt only four years earlier.
With strategic focus being a far bigger motivator than diversification, these days, itâs only natural to expect that Campbell would announce its intention to focus on its core portfolio of âsimple meals, -including soup-based snacks, and vegetable based beveragesâ.
Besides which, Godiva only makes up less than 10% of the groupâs total sales revenue. Finally, there are few synergies in distribution or marketing because the channels, consumers and positioning are so different to mass products.
So prima facie youâd think premium chocolate makers would be queuing up to buy this top luxury segment brand. But maybe that would be to look in the wrong sector. Even premium chocolate producers, like Lindt, sell mostly through regular modern trade, wholesaler and grocery channels.
Godiva, on the other hand, is not just a premium brand but a luxury one; its sales model is consequently very different; through different channels and driven by themes like âhand-madeâ, âfreshâ, âspecially for youâ. As for Nestle, weâve already expressed our belief that theyâre subtly easing out of confectionery; on top of that Nestleâs strategy doesnât include luxury products.
Given the above, maybe a big luxury products group will emerge as a buyer? LVMH immediately comes to mind â theyâve already diversified from fashion to champagne and cognac, so why not chocolates next? They would arguably be in a position to pay more than a chocolate producer, given potential synergies, not to mention the âtrophy valuationâ effect that often occurs with luxury brands.
In that case, the price for Godiva might exceed the x2 sales touted by some analysts. But is chocolate really compatible with luxury going forward ?