Glenboden M & A Originations

Kandia tees itself up for sale after buying Kraft’s Romania’s confectionery brands

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Origination Status agreement announced subject to regulatory approval, December 2006
Asset 'Sugus' and 'Silvana' sugar confectionery brands and business, Romania
Buyer Kandi-Excelent (Romania), leading domestic confectionery producer
Seller Kraft Foods (USA), multinational food group
Buyer Rationale Kandia to complement chocolate confectionery with a sugar portfolio
Seller Rationale Kraft refocusing portfolio away from sugar confectionery and into global brands
NBs Kandia now has the biggest full-range confectionery portfolio in the Balkans
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Was this an opportunistic acquisition by Kandia, or part of a cunning plan to entice a strategic buyer ? On its own, at least by western standards, the group will not have the scale to succedd in both chocolate and sugar confectionery. On the other hand, the developing part of Europe has a different idea of scale and specialisation, and marketing spend is often only in the low single digits % of turnover industry-wide there. Our tip is that Kandia will itself be acquired in the next year or so, by a major like Cadbury who’s interested in having a full-range platform in Romania and the Balkans.

Brand deals are intriguing. In theory it’s perfect for a buyer to not have to acquire more capacity and liabilities, but in practice it seems all brand deals involve other assets as well. This one is no exception, as Kandia is also to acquire production equipment (although Kraft will retain the site and convert it to production of its global chocolate brands Milka and Toblerone). Do you really want to pay good money just for a trademark?

Not surprised the financial terms weren’t disclosed – we assume Kandia got a good deal. Its quite a tradition that local private companies buy assets quickly and cheaply, from strategically-minded multinationals in ‘get rid of’ mode.

As for Kraft, this is part of their drive to focusing on core global brands, at the expense of local ones. Reminds one e.g. of when Nestle sold its local ‘Goplana’ chocolate brand in Poland, so that it could focus on its global brand ‘Nestle’ there. This is not a universal trend – some multinationals are focusing on ‘proximity’ local brands, or ‘local heros’, but not Kraft it seems. There’s also the fact that Kraft is generally exiting sugar confectionery, having sold most of this business to Wrigley in 2004. But there’s not much evidence of Kraft moving to a ‘healthier’ portfolio - chocolate confectionery still seems core to them.

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