The Wm. Wrigley Jr. Company's formal announcement of signing a purchase agreement with the privately-held Spanish food conglomerate, Agrolimen, for certain confectionery businesses of its Joyco Group, including in India, is being seen as a move that will spur the Rs 1,500-crore domestic confectionery market.
The transaction involves Joyco's operations in India, besides China, France, Italy, Poland and Spain. According to a company statement by Wrigley's, key additions to the Wrigley Company's stable of brands will include Boomer bubble gum, Pim Pom lollipops and Solano candy, which are currently sold in over 70 countries.
All three are Joyco India Pvt Ltd's flagship brands. Smaller brands in the company's domestic portfolio include Bonkers soft chews and Trex chewing gum. According to industry estimates, Joyco's domestic turnover is about Rs 200 crore. "The acquisition will help in consolidating the confectionery market, which remains a fragmented, high-volume, low-margin business. Since the confectionery trade is driven by distribution and trade margins, survival in this market is tough," said analysts tracking the FMCG sector.
Leading confectionery players in India include Perfetti Van Melle, Hindustan Lever, ITC and Nestle.
It is not clear whether Mr Arun Hegde, Managing Director of Joyco India, will continue to be the overall in-charge of the company. While Mr Hegde was not available for comment, company sources indicated that restructuring at the top management level jointly by Wrigley and Joyco was in the offing. Mr Hegde has also been holding the designation of Area Director, Asia, Joyco.
"The key drivers of acquisitions for the Wrigley Company are a strategic fit and hold potential for significant value creation," Mr Bill Wrigley, Jr, Chairman, President & CEO, Wrigley, said in a company statement. "The addition of the strong brands, people and confectionery expertise from Joyco will increase the long-term success of our business," he added.
Wrigley's acquisition of Joyco involves a cash transaction totalling $272 million, funded from the company's cash and existing credit lines. The Joyco acquisition is expected to be accretive to overall company earnings by 2005.