Ginger nuts, custard creams, Bourbon biscuits and Jammie Dodgers; there are biscuits for every time and every season. And they are big business.
The Chinese have been nibbling at United Biscuits, the UK's biggest manufacturer, while speculation is hotting up that there are predators stalking Burton's Foods, the country's second biggest biscuit-maker, as well Fox's Biscuits, part of Northern Foods. Interest first emerged earlier this year when Bright Foods, a Chinese manufacturer, began £2bn talks with private-equity-owned United Biscuits, which has around 30 per cent of the market. Its best-selling brands include Jaffa Cakes, Rich Tea and HobNobs.
But analysts believe mergers are on the cards. Conor Cahill, a partner and consumer goods expert at Deloitte, explains why: "Biscuits and snacks are seen as 'cheap treats' by consumers. Consumers have frugality fatigue. They want to occasionally treat themselves, so will spend on things like biscuits. The grocery market always outperforms during a recession."
That's why, Cahill predicts, there will be consolidation in the biscuit sector: "Scale is important, and some of the brands in the UK that could potentially be available would look great in a larger portfolio."
A recent survey in the US by KPMG found that 67 per cent of consumer goods executives in the food sector said they would be participating in merger activity over the next two years. The UK economy might be grappling with one of the most difficult consumer environments and toughest financial markets in decades, yet it is the perfect time for companies to go biscuit shopping.
United Biscuits' research shows that sales have grown 5 per cent for each of the past five years.
"Consumer goods businesses, particularly in the grocery sector, are good defensive stock in a recession," Cahill says.
Blackstone Group and France's PAI Partners, United Biscuit's private-equity owners, pulled a sale in the summer when a deal could not be reached, but word on the high street is that a new sale negotiation will start later this year. It seems likely that the biscuits and snacks arms will be sold off separately, so a buyer can choose Penguins, Jaffa Cakes and McVitie's biscuits or instead gobble up Hula Hoops and McCoy's crisps.
Consolidation could be driven by the big, established biscuit manufacturers snapping up single brands owned by a larger company with a mix of other investments.
A United spokesman says: "Concentrating on biscuits or, at least, snack foods, enables companies to focus on understanding consumers', shoppers' and retailers' needs and wants, as well as developing improved products and innovation, and communicating in an engaging way."
If this is right, the future of Fox's Biscuits could well come under the spotlight next. Ranjit Singh Boparan, the chicken entrepreneur who supplies processed poultry and ready meals to supermarkets, might be wondering why he needs shortcake rounds and Rocky Chocolate biscuit bars. His business, 2 Sisters group in the West Midlands, bought Northern Foods for £342m earlier this year and, in the process, Fox's as well as Goodfella's pizza to add to his Harry Ramsden's fish and chips chain.
An investment banker who specialises in consumer goods says: "Boparan used debt to secure the Northern Foods purchase. Fox's does not fit in as well with the rest of his empire. He may well entertain approaches."
Another candidate for sell-offs could be Premier Foods, which produces Mr Kipling cakes and Branston pickles. The group has had well-publicised problems after a profit slump this year. Mike Clarke, the new chief executive, will be taking a hard look at what his company should be focusing on.
Premier has nearly £1bn of debt and £3bn in pension liabilities. Further disposals – it has already sold a number of brands, such as Quorn – could be on the cards. Experts argue that such an established line as Mr Kipling would fetch a strong price from rivals looking to build positions in biscuits and cakes.
The potential buyers of British biscuits include some of the biggest US brands: Kellogg's, PepsiCo, and the Campbell Soup Company. A particularly mouth-watering opportunity could be the UK's second-biggest manufacturer, Burton's Foods, which counts Jammie Dodgers and Wagon Wheels among its more famous brands.
Burton's is owned by the Canadian Imperial Bank of Commerce and Apollo Global Management. They were among the backers for Duke Street Capital's purchase of Burton's in 2006, a deal that left the biscuit maker saddled with debt.
Duke Street had to give up control of the business in 2009 after struggling with that debt burden and now has only a small stake. After a number of deep cuts, including redundancies and a restructuring, the business is back in good shape and would fetch a decent sale price.
Even a potential downside – pressure from the Government and lobbying groups to lower obesity levels – has turned into an opportunity for the sector. Kraft Foods, the world's sixth biggest biscuit manufacturer and a potential buyer of others in the sector, launched its "healthy breakfast" biscuit Belvita last year.
If such ranges prove successful, there will be plenty of predators ready to take the biscuit.Reuse content