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Who will buy Russell Stover?

Private equity and Hershey frontrunners for ‘stuck in time’ Russell Stover: Analyst

By Oliver Nieburg+

25-Feb-2014
Last updated on 25-Feb-2014 at 12:54 GMT

America's number three chocolate firm on the block: Who are the likeliest bidders?
America's number three chocolate firm on the block: Who are the likeliest bidders?

Private equity firms and Hershey are prospective suitors for up for sale Russell Stover, but America’s leading boxed chocolate firm could struggle to stay relevant, according to an analyst from Mintel.

Russell Stover was yesterday forced to admit that it was exploring sale options following leaked reports to the Wall Street Journal (WSJ) last week.

Brynwood a possibility, says analyst

Marcia Mogelonsky, director of insight at Mintel, told us that private equity firm Brynwood Partners was a potential candidate for America’s number three chocolate player.

“Brynwood may want it in order to turn it around, like they did with DeMet. Or some other private equity might see it as a good turnaround.”

Brynwood Partners recently sold DeMet’s Candy for $221m to Turkish company Yildiz Holding, owner of Godiva and Ülker. In late December last year, Brynwood acquired snacks and cookies business SnackWell's from Mondelez. SnackWell’s then joined Brynwood’s joint venture business with Mondelez, the Back to Nature Foods Company.

Hershey and the Asian wild card

Mogelonsky added that US chocolate leader Hershey may be in the mood to acquire, but ruled any other US firm, including number two player Mars, out of contention.

“A wild card could be an Asian company looking for a deal and a seasonal product line. Valentine’s Day for example is the 4th or 5th most popular chocolate gifting holiday in China, and the company is also known for things like Mother's Day boxed chocolate, so it would give an Asian company a ready to go line of western style seasonal fare.”

‘Stuck in time’

Boxed chocolate firm Russell Stover reliant and seasonal sales and is struggling to attract younger consumers, says analyst

But the analyst said that Russell Stover was a business “a bit stuck in time” and reliant on seasonal sales.

“Its image is one of comfort, not dynamism. It may be finding the competitive environment is getting too challenging. The company's strength is as a seasonal provider.”

She said that the company lacked creative flavors for younger chocolate consumers and risked losing its relevance as the firm’s key customers, the Baby Boomers, aged.

“Their other, much smaller base is chocolate for kids - also seasonal - and that market is also a weak reed, with all the concern about developing better eating habits for kids. I think Russell Stover’s base is shrinking and they have not found a way to remain relevant.”

Russell Stover a $1.3bn business?

Russell Stover spokesperson Robbie Vorhaus said yesterday that the firm was in good financial shape, but refused to confirm a $600 million annual sales figure reported by the WSJ.

 He said the company may consider offers of around $1.3bn. “But there’s no numbers and no suitors. It’s all too early.”

The company is privately held by the Ward family and employs around 2,700 people across two factories in Kansas, a plant in Colorado and another in Texas. Its products are sold at major retailers including Walmart, Walgreens and CVS. It also operates around 40 company-owned retail stores.

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