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Ferrero Faces A Challenging Marketplace After Fox's Takeover, Says Analyst

Italian confectionery maker Ferrero is likely to face challenges in building the Fox's Biscuits brand in the UK, in what is a hugely competitive marketplace, a leading industry analyst has said.

Dean Best of GlobalData was commenting following Ferrero's recent takeover of the Fox's brand, which saw it acquire two production sites, at Batley and Kirkham, from 2 Sisters Food Group.

The deal, which is expected to be completed at the end of the month, is the third major biscuit acquisition by Ferrero in the past 18 months, following the purchase of Keebler cookies from Kellogg's in the US as well as the Kjeldsens Butter Cookies business from Campbell Soup.

"However, the competitive UK biscuit market could prove a challenge even for a business that clearly believes in the sector," Best commented.

Crowded Market

While Ferrero knows the UK market well, with brands such as Kinder, Tic Tac, Ferrero Rocher and Thornton's well established in the British marketplace, it will also likely have done its homework on the competitive nature of the biscuit market, which has seen an increase in sales in recent months due to the COVID-19 crisis.

"McVitie’s owner Pladis and Mondelez International, with its Cadbury and Oreo biscuits, present formidable competition in a market forecast last year by GlobalData as  set to have a compound annual growth rate of 2.6% between 2018 and 2013," said Best.

"Even allowing for a boost from COVID-19 in recent months, that growth signals how mature the market is in the UK, with intense promotional activity and private label significant challenges.

"The macro trend of health may also weigh on the growth prospects of some of the more mainstream parts of the biscuit market, although there are other underlying trends, such as indulgence and convenience, that can provide manufacturers platforms upon which to build."

According to GlobalData, the Fox's Biscuits brand had a market share of 3.1% in 2018, putting it well behind the likes of McVitie's and Cadbury.

Premium Positioning?

"In years gone by – many years, some would argue – Fox’s had something of a premium cachet, which Ferrero might decide to try to re-capture, albeit in a segment where there is a plethora of rivals," said Best.

"Ferrero does have the resources to back in the Fox's brand in terms of product development and marketing, while the group may also be able to capture synergies in areas like raw-material procurement to add fuel to that investment.

"Nevertheless, while driving growth from Fox’s isn’t impossible, it may take a lot of work for Ferrero to find a sweet spot for the brand."

On the Fox's Biscuits sale, 2 Sisters CEO Ronald Kers said last week, “We believe the sale to Ferrero is not only beneficial for 2 Sisters Food Group, but it means a positive future for the Fox’s brand with an owner who has a compatible culture and a global reputation for high-quality branded chocolate and biscuit products.”

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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