Dive Brief:
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Fannie Mae and Harry London chocolate brands are being sold by 1-800-Flowers to Ferrero International. Ferrero, which also owns Nutella and Tic Tac, will acquire 79 retail stores (mainly around Chicago), a manufacturing plant, and two temperature-controlled warehouses. The deal is expected to close by May 30.
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As part of the deal, Ferrero and 1-800-Flowers will sign a distribution agreement providing the florist with U.S. distribution rights for Fannie May, Harry London and certain Ferrero products.
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1-800-Flowers also owns Harry & David gourmet gift baskets, Cheryl's Cookies and The Popcorn Factory.
Dive Insight:
The transaction is expected to benefit both companies by getting Ferrero better distribution in the U.S. while 1-800-Flowers will improve its balance sheet and lower the working capital costs of its business. Ferrero's expansion in the U.S. market follows deals by Hershey and Mars, which acquired the remaining stake in its Wrigley candy subsidiary last year.
Food and candy makers have been looking to expand their reach through mergers to help boost slowing sales and contend with the public's growing desire to snack. Many of these larger attempts have failed. Mondelez tried to acquire Hershey last summer, and earlier this year Kraft Heinz made an attempt to purchase Unilever. Even though both of these deals fell apart, further consolidation is expected in the food and candy space.
Sweets makers also could look to diversify like Hershey did when it purchased jerky maker Krave or Ripple Brand Collective, owner of premium chocolate snacking brand barkTHINS. Hershey's new CEO said earlier this month that M&A will play an important role in diversifying the company’s portfolio going forward, with the aim of becoming "an innovative snacking powerhouse."
As companies consolidate it remains to be seen if the consumer will benefit. Many fear consolidation will lead to fewer choices for the public. Still, shoppers could potentially benefit if distribution savings are passed along.
