Ulker makes international breakthrough with Godiva chocolate acquisition
- December 21, 2007
||subsidiary divestment agreement reached, December 2007
||brands, facilities, subsidiaries, patents and proprietary trade rights of Godiva Chocolatier (originally Belgium), worldâs leading luxury chocolate business
||Ulker Group (Turkey), largest domestic food company
||Campbell Soup Company (USA), global producer of simple meals and vegetable beverages
||total consideration of $850 mln, represents est. P/S of 1,8 and P /EBITDA of 15,0 (2007A)
||'trophy' acquisition of luxury brands, national pride, attractive valuation
||focus on core mass -market categories
||acquisition dubbed as 'the greatest New Year's gift for the Turkish people'
What a disappointment for Campbell Soup. When Glenboden reviewed this story a few months earlier, we though the valuation might exceed the x2 Sales touted by some analysts, and that Godiva would attract a luxury products major like LVMH. Instead, no luxury or confectionery multinational emerged as the buyer, but rather a national champion from Turkey. At the same time, Ulker now has a major opportunity for further expansion in the US and other developed markets.
Before this deal, Ulker had virtually no international credibility. A family run, âŹ 5 bln turnover conglomerate, itâs one of Turkeyâs biggest industrial groups, whose food interests alone span biscuits, confectionery, soft beverages and dairy products. Itâs also present in things as unrelated as telecom and real estate. Its expansion strategy has been across industries, not geographies; its business is nearly all domestic, plus some exports to adjacent countries; there seem to be no foreigners in any of its management teams.
To say that Godiva is a risky venture for Ulker would be an understatement. Itâs its first major foreign undertaking, as well as its first venture beyond mass âmarket products. So, new geography plus new category. But it seems much more is behind this than mere business rationale. Luxury brands generally attain âtrophyâ status, but in this case thatâs coupled with a national pride, that for once Turkey is the âgroomâ and not the âbrideâ in the globalization story. Thatâs a very strong combination.
Ulkerâs emergence as the buyer is all the more surprising, when one remembers how many international confectionery players were said to be interested in Godiva â Nestle, Lindt, Mars and Starbucks were all mentioned. So how did this come about ? We think three main reasons.
First of all, brand positioning. Obviously the case for a luxury player to add chocolate to its portfolio of fashion, clothing accessories and fine alcohol was too weak. That leaves premium chocolate players, like Lindt. Clearly here, differences in sales channels etc, between âpremiumâ and the more boutique focus of âluxuryâ, were too great. Plus also it may be that Godiver is facing too much competition from âcraftâ chocolates with arguably greater authenticity.
Secondly, it looks like Godivaâs financials are not great. Thereâs been no mention of its growth rate, which suggests itâs quite low. Also, the EBITDA margin comes in at 12%, which is surely very low by luxury brand standards.
Thirdly, and most important in the short term at least, 64% of Godivaâs sales are in the US market, with a further 18% in Japan. Economic weakness in those markets, and projected declines in consumer spending in the US, must have deflated interest in Godiva amongst the majors.
Still, it might be that âfortune favours the braveâ, and that in a few yearsâ time, when the US$ recovers to a more respectable level, the acquisition will look like a bargain for Ulker. On top of that, they only need to sell the boutiques, lower the price points, and distribute Godiva through the likes of Starbucks, to increase sales hugely. âBringing luxury to ordinary peopleâ is made easier when, as reported, brand awareness of Godiva is as high as 89% amongst Americans.