Ricolino is one of the undisputed leaders in the Latin America candy and chocolate market, generating net sales of $500m in 2021.
“We ventured into the confectionery industry with the establishment of Ricolino in 1970; today, after 52 years of growth and progress, it is the industry leader in Mexico,” said Daniel Servitje, chairman and CEO of Grupo Bimbo.
“We truly recognise the Ricolino family for this amazing accomplishment and are deeply thankful for their commitment and hard work. I’m confident that Mondelēz International will leverage these amazing brands to a much higher position.”
Diego Gaxiola, Bimbo’s director of global administration and finance, added the decision to divest was to redirect focus on its key categories.
“This transaction strengthens our financial profile, by generating value for Grupo Bimbo, while promoting the long-term focus on our key categories,” said Gaxiola.
“We reaffirm our commitment and investment in Mexico, where this year we will be investing approximately $750 million dollars, a historic figure that confirms our confidence in the country.”
Bimbo is the largest baking company in the world, with 206 bakeries and plants and more than 1,600 sales centres located in 33 countries. It produces over 10,000 products – including bread, cakes, cookies and salty snacks – and has the largest direct distribution network in the world, with more than 3.1 million points of sale, over 56,000 routes and almost 140,000 associates.
Love for Mexico
Mondelēz International also shares a deep history in Mexico and said the transaction reaffirms its commitment to the country.
It also builds on the company’s aggressive prioritisation of fast-growing snacking segments in key geographies. In January 2022, the Oreo and Cadbury brand owner finalised the acquisition of Chipita SA, a major player in the Central and Eastern European snack-size cakes and pastries category. This followed a year of purchases, including UK performance nutrition company Grenade; Australian biscuit and cracker producer Gourmet Food Holdings; and US better-for-you snack producer Hu.
The Ricolino bolt-on will double the size of Mondelēz Mexico’s business and provide an attractive entry point into the country’s chocolate category.
The American conglomerate is one of the largest food companies in the world, with a presence in more than 150 countries around the world. Ricolino’s iconic chocolate and candy brands – including Vero, La Corona and Coronado, among others – have more than 50 years history in Mexico, but are also popular across the US. Today, the company’s more than 2,100 direct store delivery (DAD) routes reach 440,000 traditional trade outlets, providing significant scale and broad brand availability.
“This acquisition will provide a step change for our business in Mexico, an important growth market for us, more than tripling our routes to market and growing our position in core snacking categories,” said Dirk Van de Put, chairman and CEO of Mondelēz International.
Added Oriol Bonacloch, president of Mondelēz Mexico, “2022 is a very important year for us as we celebrate 95 years in Mexico and today we reaffirm our commitment to the country by announcing this agreement.
“With the arrival of some of the most iconic and beloved candy and chocolate brands in the country, we will complement our business to offer our consumers a broad portfolio, backed by an important production and distribution chain nationwide.
“We are very excited to welcome in the future a team of extremely talented collaborators, with a vision to win and grow, who share our values and love for Mexico.”
The $29b confectionery giant is funding the transaction through an issuance of debt and cash on hand. Subject to customary closing conditions, it is expected to close in late Q3 or early Q4 2022.
Unique fit for Mondelēz (MDLZ)
Andrew Lazar, senior analyst of Packaged Food for Barclays, said you “would be hard pressed to find an asset that is a more unique fit.”
Ricolino has grown revenues at an +8% CAGR over the past five years, gaining a 25% share of the candy sector and the #4 player in chocolate, however, he noted the business accounted for less than 5% of Grupo Bimbo’s sales.
“We think there is much more that MDLZ can do with this asset and plenty more runway for growth,” said Lazar.
“Notably, this acquisition will double the size of MDLZ’s business in Mexico, a key emerging market, and fits well with its current business there, which is largely centred around candy & gum.
“That said, we think one of the less obvious, though potentially even more compelling aspects of this acquisition, is the potential for MDLZ to be able to leverage the route to market capabilities of Ricolino for its core biscuit business.
“Ricolino has more than half of its sales going through the mom and pop/traditional trade (‘up and down the street’), [which will] more than tripling MDLZ’s routes to market in Mexico. We would not be surprised to see MDLZ utilise this route to market capability to drive meaningful distribution for its iconic global biscuit brands, similar to the successful playbook the company is employing in other key emerging markets, such as India.”
On the other hand, Lazar said the transaction marks an interesting move for Grupo Bimbo, which, of ate, has been more active in acquiring than disposing. However, the $1.3bn price tag “implies a multiple of about 2.6x EV/Revenue, well above Bimbo’s current multiple of 1.0x, and hence, we see this transaction as accretive."
