Taking the Biscuit

It may have taken eight long years and a few unexpected hiccups, but when United Biscuits was finally absolved from its private equity purgatory in late 2014, the sell off laid bare a call to arms among the global giants of the confectionary world that eventually saw Turkey’s Yıldız Holding acquire a strategic centerpiece to its ever expanding arsenal. A strong bid of roughly £2 billion was sufficient to settle a competitive three-way auction defeating Kellogg’s and Burton Biscuits toward ownership of the manufacturing and brand name powerhouse behind McVitie’s and Penguin biscuits, among many others.

United Biscuits joins Ülker, the crown jewel in Yıldız’s expansive portfolio with a dominant focus on biscuits, cakes, and chocolate, to create the third largest player in the global biscuits category after Mondelez and Kellogg’s.

One of Turkey’s vintage and wealthiest conglomerates, Yıldız Holding has an extensive range of interests encompassing confectionary, dairy products, soft drinks, and retail, while also laying claim to an abundant overseas operation. Over 40,000 employees spread out across 10 countries from the US, China, and Japan, to the Middle East and North Africa, are cogs in a privately held enterprise garnering $7 billion in sales throughout 2013 and estimated to be the biggest food group by revenues in Central and Eastern Europe, Africa, and the Middle East. Its signature international brand is Belgium’s luxury chocolatier Godiva.

United Biscuits is the UK’s largest biscuit manufacturer and brings a 25% market share from its base as well as enviable positioning in European markets and 16 manufacturing facilities across the continent. Sales in 2013 were posted at £1.1 billion, and while in slight decline, the acquisition by Yıldız will create the world’s third-largest biscuit company after Mondelez and Kellogg’s. Blackstone and PAI Partners, which acquired United Biscuits in 2006, shelved original plans to sell to Chinese group Bright Food in 2010 and have since concentrated on expanding United Biscuit’s interests in emerging markets such as Nigeria and Saudi Arabia.
The deal is part and parcel of a series of aggressive mergers and acquisitions designed to elevate Yıldız to the very top of the food chain. While the acquisition of Godiva was global in scope and brand orientated in purpose, the capture of United Biscuits reflects a highly targeted and strategic aspiration. It also has a central geographical advantage capitalizing on bringing a stabilizing force from the European markets to counteract increasing volatility in the Middle East, whilst opening access to the biscuits’ spiritual British homeland and crucially an inroad to India through enduring colonial ties. With its established strength in the MENA region, and planned inroads into the Latin American and Russian markets, Ülker can look forward to a global roadmap of stable markets, strong brands, and an integrated network of manufacturing facilities.

Cem Karakaş, Yıldız CFO, foresaw a doubling of Yıldız’s international sales as a proportion of revenues to over 70%, noting, “we are planning to invest and expand industrial and R&D capabilities in the UK and primarily make the UK a supply hub for a good portion of the world.” Growth in Africa and the forceful rise in appetite for western brands among consumers in emerging markets are understood to be among the key catalysts for the acquisition alongside a shift toward innovation and expertise.

The challenge now for Yıldız is further developing what has been an impressively rapid international growth whilst the shedding of their underdog status will lead to more aggressive competition from global peers. Ülker lacks a defining powerbrand that can be marketed globally to the masses much in the way Mondelez leverages Oreo cookies. Having established solid regional strongholds across the world and cemented their status at the top table with the United Biscuits acquisition, a series of powerbrands and the household fame that accompanies them is the only missing ingredient in a promising step towards securing a Turkish legacy.