Class of 2020 | msprin@sas.upenn.edu
As of early January, Connecticut based buyout firm L Catterton is looking to close a deal to sell Ferrara Candy to Canadian Onex Corp. Onex has apparently won the auction for the confectionary company, beating out other private equity firms hoping to pay over a 10 figure sum to buyout the maker of Trolli gummies. The deal is supposedly valuing Ferrara at $1.3 Billion according to Reuters, making the deal a rare billion-dollar transaction in the confectionary sector. Although the deal has not yet closed and could still fall through, Onex appears to be the clear winner in the race for Ferrara Candy. According to Moody’s, Ferrara’s net sales this year through March 31st came in at approximately $880 million, proving the candy provider is able to sell its signature candies on a large scale.
L Catterton bought the Illinois-based company in 2012, and under Catterton’s management, Ferrara was merged with another one of their portfolio companies, Farley’s & Sathers Candy Company. Through this merger, over the last 5 years the company has grown and expanded its reach as a provider of sweets. During this five-year period, L Catterton had been using its ownership to push executive teams that focused on innovation in the variation of Ferrara’s classic candies such as Cinnamon Red Hots, Now & Laters and Trolli gummi bears. This resulted in Ferrara rolling out varying flavors of the signature candies, likely increasing sales. LCatterton was also focused on implementing innovative measures on the packaging and marketing of the candy, hoping that new marketing strategies and revamped looks on the packages of Ferrara’s candy would yield better sales figures, ultimately driving the company’s valuation hire before the Connecticut firm exited. Ferrara is still up against candy making giants such as Hershey’s and Mars Inc., though their expertise in certain variations of candy such as gummi bears should allow them to produce solid sales, even due to a slowing demand for candy in many areas.
Although the broader confectionary industry has recently been struggling due to consumer’s switching to healthier alternatives, the sector has remained attractive to private equity firms due to its ability to stay consistent in negative economic environments, as well as candy’s ability to appeal to consumers of all ages. This consistency in the sector makes candy a staple for many retailers in the United and abroad, which gives the owners of a confectionary company with signature brands such as Ferrara negotiating power with large scale retailers who hope to fill their shelves with popular candy. L Catterton likely used its merger and innovative strategies to combat the slowing demand for confectionary products, and Onex Corporation must also have a vision for where they will be able to take Ferrara in the future.
The Canadian buyout firm will likely work to increase Ferrara’s value through continued innovation in the marketing of the company’s signature candies. In order to stay dominant over new consumers, Onex will likely need to gear much of its marketing toward youth who are witnessing a decline in the popularity of candy. Onex will also likely hope to outcompete Hershey’s, Mars Inc. and other big name confectionary companies in the United States using their signature brands, and possibly even using new products better suited to consumers who are looking to avoid high concentrations of sugar. Although the future of Ferrara candy is unknown, Onex will hope to implement value increasing changes that justify the billion-dollar valuation of Ferrara Candy.