In a move that could reshape the global confectionery landscape, Mondelez International, Inc. MDLZ is exploring the acquisition of iconic chocolate maker The Hershey Company HSY, per media sources. If finalized, the acquisition would create one of the world's largest confectionery companies.

This acquisition, if successful, would significantly strengthen Mondelez’s position in the U.S. chocolate market. Hershey's established dominance would complement Mondelez's global presence, particularly its European chocolate powerhouses, Cadbury and Milka.

Focus on Acquisitions: A Growth Driver for Mondelez

Mondelez has consistently pursued acquisitions to expand its scale and strengthen its portfolio. Recent deals include a majority stake in Evirth, a leading Chinese cake and pastry manufacturer, and strategic partnerships like the co-development of chocolate products with Lotus Bakeries to penetrate the Indian market.

Other notable acquisitions include Clif Bar, Ricolino, Chipita S.A. and Hu Master Holdings, all of which have bolstered Mondelez’s capabilities across key categories. These moves underscore the company’s commitment to aligning its portfolio with emerging consumer trends and accelerating growth in high-potential markets.

MDLZ Strengthens Core Categories

Mondelez continues to showcase exceptional performance in its core categories of chocolate and biscuits, reflecting its resilience and consumer appeal even in challenging economic conditions. The company’s revenue growth management strategies, including tailored pack sizes and diverse price points, have been instrumental in maintaining consumer loyalty and driving market share gains. In the third quarter of 2024, the chocolate category grew by 9.2%, with robust contributions from key markets in developed and emerging regions. 

Iconic brands such as Cadbury Dairy Milk, Milka, Toblerone and Freia Marabou demonstrated strong momentum, capitalizing on their enduring consumer loyalty and broad market reach. The biscuits and baked snacks category reported 3.3% growth, driven by a balanced mix of pricing and volume/mix improvements. 

As consumers prefer snacking over traditional meals, the company’s core categories — chocolates and biscuits — have historically depicted resilience to economic downturns and pricing actions. As Mondelez continues to invest in innovation, marketing and distribution, the durability of these core categories positions the company well for sustained growth, particularly as these products align with consumer preferences for high-quality, accessible snacks. This Zacks Rank #3 (Hold) company is on track to generate around 90% of its revenues through these categories by 2030.

MDLZ & HSY vs. Industry

Image Source: Zacks Investment Research

What’s More for MDLZ & HSY?

Hershey is a major producer of quality chocolate products in the United States, alongside being a global leader in sugar confectionery products. The company’s core brands — Hershey’s, Reese’s, Hershey’s Kisses, Jolly Rancher, Brookside, Sofit and Ice Breakers — have been growing strongly due to advertising investments, in-store merchandising, and programming and innovation. Hershey regularly brings innovation to its core brands to meet consumer demand and needs that are not addressed by its current portfolio.

Both Hershey and Mondelez are currently encountering input cost inflation as a result of elevated cocoa prices, which could limit margin growth. However, the companies are on track with revenue management initiatives like pricing to counter these obstacles. In the past three months, shares of MDLZ have tumbled 17%, with Hershey down 5.7%. The Zacks Food – Miscellaneous industry saw a decline of 6% in the same time frame, while the Zacks Food – Confectionary industry dipped 0.6%. 

Despite these challenges, the potential acquisition of Hershey presents a transformative opportunity for Mondelez. Combining Hershey’s U.S. dominance with Mondelez’s international reach would create an unparalleled confectionery titan capable of reshaping the competitive landscape. For Mondelez, it represents a rare opportunity to dominate the lucrative U.S. chocolate segment while bolstering its international portfolio. While the buyout remains uncertain, a successful deal could set the stage for a new era of growth in the industry.

2 Solid Food Bets

Ingredion Incorporated INGR manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently sports a Zacks Rank #1 (Strong Buy). INGR has a trailing four-quarter earnings surprise of 9.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.4% from the year-ago reported number.

Freshpet Inc. FRPT manufactures, distributes and markets natural fresh meals and treats for dogs and cats. It currently carries a Zacks Rank #2 (Buy). FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings implies growth of 27.3% and 228.6%, respectively, from the prior-year reported levels.

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