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Yildiz Holding becomes World’s Third Largest Biscuit Manufacturer following United Biscuits Acquisition

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The news is finally out. Yildiz Holding is the new owner of United Biscuits, UK’s leading biscuit player, which was in the middle of a fierce battle with the US-cereal giant Kellogg, its British rival Burton’s and Turkish food group Yildiz for the last two months. Following the acquisition, Yildiz is now the world’s third largest biscuit player, behind Mondelez and Kellogg, leapfrogging both Nestlé and PepsiCo. The merger also brings Yildiz one step closer to its pledge of becoming a truly global company, building on its recent buyouts of the Belgian gourmet chocolatier Godiva and US premium confectionery player DeMet’s. While many food companies are busy seeking growth in the emerging world, Yildiz has chosen to invest in a mature market. Euromonitor International investigates why.

Top Six Biscuits Companies by Retail Value

Source: Euromonitor International

Home is not where growth is

Turkey is showing buoyant growth in biscuits. However, its 9% historic CAGR somehow falls short of the double-digit growth of other emerging markets, like China, India and Brazil, and the country’s contribution to global growth was below that of mature markets like France, UK and US over 2009-2014. In addition, Yildiz has consistently underperformed the Turkish biscuit category over the last five years with its share falling from 55% in 2009 to 45% in 2014, while that of its closest rival, Eti Gida, has increased from 25% to 33%. This is largely because of Eti Gida’s high frequency of new product launches and innovation in terms of flavour, texture and package, which better resonate with consumers.

Mature markets still command the lion’s share of biscuits

Developed markets of Western Europe, North America and Australasia still command 41% of global biscuit sales and with the exception of Brazil and Uruguay, the ten biggest per capita markets all come from the Western hemisphere. United Biscuits’s brands are sold in four of these markets, and in the UK the company controls 22% of the biscuits category, selling double as much as its next competitor, Mondelez. Although there is slower growth in mature markets, the growth is more balanced and of higher value, enabling emerging market companies like Yildiz, subject to volatilities in their home market, to better balance their portfolio.

In addition, emerging market consumers tend to associate Western brands with higher quality and better taste, making Western companies like United Biscuits an attractive acquisition target for local companies wanting to make a bigger global footprint. A similar strategy was pursued by the Chinese Bright Food, which purchased UK cereal firm Weetabix back in 2012. Yildiz itself has successfully introduced Godiva in Turkey via speciality shops and high-end retailers, which helped the company to target a whole new segment of the market and improve its margins. Given Yildiz’s established distribution network, United Biscuits’s brands can be leveraged in a similar way to compete with its local rival Eti Gida in its home market.

World’s Top 10 Biscuits Markets by Per Capita Consumption

Source: Euromonitor International

Note:  High inflation markets including Argentina and Belarus are excluded from the above analysis.

United Biscuits is not just about the UK

Although the UK is an important market for biscuits and the bulk of United Biscuits’s business lies in the UK, growth comes from outside. United Biscuits’s out-of-UK sales as a share of its overall sales has increased from 30% in 2009 to 47% in 2013, with the majority of growth coming from Nigeria, France and India, where Yildiz has a minimal presence. In addition, given that Yildiz’s portfolio is well aligned with that of United Biscuits’s, the acquisition is likely to enable the company to leverage its brand equity in markets where consumer awareness of Ülker (its local brand), is low and vice versa with United Biscuits’s brands in markets where they are not present. As Yildiz has been in the biscuits business for 70 years and has strong knowledge in the category, it might even help United Biscuits to grow in its home market, where it underwent a rebranding earlier this year to reinvigorate its declining market share.

More than the sum of its parts

Unlike Godiva and DeMet’s, both of which are niche premium players, United Biscuits markets purely mass market brands and is therefore better aligned with Yildiz’s long-term strategy of becoming a global company. United Biscuits enjoys not only an established image in the UK but also boasts growing popularity in the rest of Western Europe and broader international markets like Nigeria and India, where rising incomes spur demand for premium bakery and confectionery. In the long term, the acquisition might even help Yildiz to better leverage its own brand to mature markets. An exciting time for Yildiz and a missed opportunity for Kellogg which has reported yet another decline in its global sales.

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