NEW YORK (Commodity Online): With rising Cocoa prices, the chocolates industry is set for a spate or mergers and acquisitions. Smaller players will find the going tough with result bigger players will gobble up smaller ones.

Already Kraft has made a bid to take over Cadbuyr while US based Hershey and Italian manufacturer Ferrero are also hot in the race. Meanwhile, Nestle is reportedly planning to outbid the Kraft offer. The shares of Cadbury have zoomed in recent times to reach an alltime high of 816 pence ($13.6) in an intra-day session and well above Kraft’s bid for 724 pence per share.

Kraft’s unsolicited $16.4bn bid for Cadbury, if successful, would result in the creation of the largest confectionery manufacturer and threaten Nestlé’s and Hershey’s market positions. Cadbury has strong exposure to emerging markets of India and Mexico where it holds dominant market share and hence the interest in the stock, analysts said.

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Meanwhile, news reports suggested the likelihood of Nestle eyeing Swiss manufacturer Lindt & Sprungli as rising Cocoa prices are sure to hurt the bottomlines of the later.

Fitch ratings said that Kraft’s bid for Cadbury may mark flurry of M&A activity to follow in the chocolates industry as it struggles to grapple with rising cocoa prices. The packaged food industry hasn’t fared badly in the recessionary phase and looks up to fare better in 2010. Therefore, larger players might be looking at expanding their market share particularly in emerging markets of India, Russia and China. It is estimated that chocolates industry is rising 18% annually in India. And hence the talk of more mergers and acquisitions worldwide.

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