Mars Inc: The Chocolate Conglomerate
by: Annie Gasparro
Oct 30, 2014
TOPICS: Disclosure, Publically Held Company, Privately Held Company, Conglomerate
SUMMARY: Mars is a privately-held company meaning it is not required to provide the same disclosure as publicly-traded companies. Public companies face scrutiny and pressure private companies don't. Mars is in the candy, pet food and food business. This group might not seem related, but Mars finds synergies in processes and production. Mars is doing well and recently opened a new plant. Hershey is its main rival in the industry. The companies have secretive production processes because they cannot patent recipes. The candy business is thriving despite greater health consciousness in the U.S. because shoppers think of candy as a small indulgence. Hershey's market share is 36% which is up from 35% in 2005 and Mars increased to 28% from 24% over the same period. Mars does not disclose much about its finances and does not have to because it is a private company, but reported its annual revenue is about 50% higher than it was in 2007. The increase is explained by the acquisition of Wrigley. Sales of candy are up in the U.S. for both publically traded Hershey and the privately-held Mars.
CLASSROOM APPLICATION: Mars and Hershey are rivals, but one is publically-traded while the other is privately-held. This is the case for Mars and Hershey which together control about two-thirds of the candy market. Mars has a unique corporate identity and product mix which it can support because of its status as a private company. There is pressure on public companies for spinoffs, more disclosure and cost cutting. Just because it's private doesn't mean Mars isn't aware of costs or efficient. The new plant demonstrates a commitment to avoid waste. Production is highly automated. There is collaboration at Mars between production facilities in the various business segments. Mars' diversification might fare differently if it was publically traded. Mars illustrates some of the differences and strengths between public and private companies. Both illustrate that either business structure can support success. Public companies are required to disclose detail on everything from financial performance to management goals while private companies can more selectively disclose performance.
QUESTIONS:
1. Based on information in this article as well as a web search, explain the differences between a publically held and a privately held company. .
2. What does the term “disclosure” mean in this article and why is it important to investors in publically held companies?
3. Explain what the business term “conglomerate” means (web search time…) and tell me if you think Mars Inc. is a conglomerate. Why or why not?
4. Describe the communication that occurs between the different business segments at Mars. END