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Hershey Media Report 8/5/16
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Kellogg Raises 2016 Outlook as Cost Controls Boost Profit, Margin
Aug 4, 2016 | Wall Street Journal
By Annie Gasparro
Brief mention of the Mondelez bid in the context of Kellogg's earnings outlook. Relevant portion pasted below. -
Coca nuts
Aug 5, 2016 | The Economist
THEY have “brew bars”, single-origin beans and hessian sacks from exotic lands. Sound familiar? Posh chocolate shops are springing up in the hip neighbourhoods where coffee culture long ago took root. All the talk is of aromas and sustainability—the usual stuff of craft products that makes it seem stingy not to fork out £7.50 ($10) for something that disappears in a few mouthfuls. -
Mondelez may make second Hershey bid as five Trust members to leave
Aug 4, 2016 | Confectionery News
By Douglas Yu
Bob Fernandez, author of The Chocolate Trust: Deception, Indenture and Secrets at the $12 Billion Milton Hershey School, expects Mondelez to make another play for Hershey after Hershey rejected its $23bn takeover earlier last month. -
Gabelli Dividend Growth Fund 2nd Quarter Commentary
Aug 4, 2016 | Guru Focus
By Holly LaFon
Brief mention of the Mondelez bid in the context of Mondelez stock. Relevant portions pasted below.
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Kellogg Raises 2016 Outlook as Cost Controls Boost Profit, Margin
Aug 4, 2016 | Wall Street Journal
By Annie Gasparro
“There’s a lot going on in the environment,” Mr. Bryant said in the interview, pointing to the recent announcement that Danone SA plans to buy WhiteWave Foods Co. andMondelez International Inc.’s unsuccessful bid for Hershey Co. “But really what we’re doing is independent of that—this is an unprecedented level of margin expansion for the company.”
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Aug 5, 2016 | The Economist
THEY have “brew bars”, single-origin beans and hessian sacks from exotic lands. Sound familiar? Posh chocolate shops are springing up in the hip neighbourhoods where coffee culture long ago took root. All the talk is of aromas and sustainability—the usual stuff of craft products that makes it seem stingy not to fork out £7.50 ($10) for something that disappears in a few mouthfuls.
“Coffee has paved the way for chocolate,” says Lani Kingston, the boss in London of Mast Brothers, a well-known Brooklyn-based chocolate-maker that came to Britain last year. For a while it even had to fend off intrigue over whether it had melted another maker’s squares into its own bars, such is the growing fascination with artisanal chocolate.
More established chocolatiers are trying to do for the stuff what Starbucks once did for coffee—investing a commoditised product with a dash of high-street chic. Last year Ferrero Rocher, an Italian brand, bought Thorntons, a UK chocolate retailer with almost 250 stores. Lindt and Sprüngli, owner of Switzerland’s best-known brand, aims to become the world’s biggest retailer of premium chocolate in four years. It expects to add 65 stores this year, after 50 new ones in 2015.Advertisement
Posh chocolate is where the money is. Euromonitor, a retail consultancy, says that worldwide consumption of all chocolate has been stagnant during the past five years, mostly because rich-world consumers are eating healthier snacks. But sales of dark chocolate grew by 5.1% and 3.3% last year in America and western Europe, respectively.
The upmarket trend extends back to the grower. Doug Hawkins of Hardman Agribusiness, an advisory firm, says that most cocoa is produced by smallholders who have not increased supply in recent years as much as other commodity producers, helping push up prices. Posh chocolatiers such as Britain’s Hotel Chocolat, with higher margins, can absorb that better than big brands such as Mars.
Rising raw-material costs and stagnant demand bode less well for big manufacturers. That may be one reason Mondelez International, owner of Cadbury, has bid for Hershey, another American firm. They are eying potential chocoholics in China and India. But again, it is quality chocolate that will most appeal to elites with purchasing power. As Euromonitor notes, it would take an Indian on average a month’s wages to buy the chocolate a Brit scoffs in a year.
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Mondelez may make second Hershey bid as five Trust members to leave
Aug 4, 2016 | Confectionery News
By Douglas Yu
Bob Fernandez, author of The Chocolate Trust: Deception, Indenture and Secrets at the $12 Billion Milton Hershey School, expects Mondelez to make another play for Hershey after Hershey rejected its $23bn takeover earlier last month.
It comes as the AG reached an agreement last Friday with the Hershey Trust - whic hhas 80% voting rights for Hershey - in the Orphan's Court Division of the Dauphin County Court.
The AG has been investigating spending patterns by Trust board member.s
"All of our efforts that led to this agreement were made to ensure that the vision of Milton and Catherine Hershey remains intact," attorney General, Kathleen Kane, said in a statement. "They had the foresight to establish a Deed of Trust to provide a superb education for generations of disadvantaged children. The reforms in this agreemtnw ill help ensure that continues."
Majority of board members to step down
The Trust has faced criticism in recent years for extravagant spending.
Ex-board chairman Robert Cavanaugh is one of the three board members that will leave the Trust. The other two, according to a statement made by AG, are Joseph Senser and James Nevels. In addition, James Mead and Velma Redmond (the current Trust chairman) will leave no later than Dec 31, 2017.
Facing an exodus of directors over the next 17 months, the Trust board now will have to find new directors to replace those departures, according to Fernandez.
The court agreement also shows that prior to the elction of any new manager/director, the Hershey School and the Hershey Trust company must now give the Office of Attorney General 30 days written notice, "including a resume of the candidate's education, experience and relationship, if any, to incumbent managers/directors."
The agreement also stipulates that the Trust board should have 13 members. This will require the appointment of nine new board members over time, Fernandez said.
What does the chairman say?
Upon the agreement with the Office of AG, Redmond also penned an open letter, saying that the board was "satisfied with the outcome."
He added that the joint boards wiht AG now move forward, working collaboratively, as "we driect, support and fulfill the ongoing mission of the Milton Hershey School."
Redmond pointed out that the Hershey School is performing at exceedingly high levels, and will continue to grow its enrollment towards 2,300 students with construction already undre way on its North Campus expansion site.
Is Mondelez taking advantage of a chaotic board?
"This year's turmoil in Hershey may have provided an opening for Mondelez to begin discussions on acquiring the chocolate company," Fernandez said.
"Another view is that the bitter feelings among board members could paralyze decisoin-making and make it difficult to do anything over the next several months," he continued.
"Mondelez has not said it lost interest in Hershey and many believe it could make another pass at it now that the attorney general has concluded its investigation with Friday's agreement," he added.
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Gabelli Dividend Growth Fund 2nd Quarter Commentary
Aug 4, 2016 | Guru Focus
By Holly LaFon
The top contributors to performance in the Fund in the second quarter were our positions in energy, including Halliburton (1.3% of net assets as of June 30, 2016) and Exxon Mobil (2.1%), and in healthcare, including Pfizer (3.8%), Medtronic (1.7%) and Bristol Meyers (1.3%). Mondelēz (2.1%), which made an offer to acquire Hershey that was quickly rejected, was also a top contributor. The contribution of a position to performance is a function of the position’s size and its gains in the quarter.
On June 30, Hershey (HSY) confirmed that it received and rejected a preliminary indication of interest from Mondelēz to acquire HSY for $107 per share in cash and stock, demonstrating Mondelēz’s continued interest in pursuing acquisitions while remaining an independent company.
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