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Mondelez International has caught the attention of the food industry with a merger deal with Hershey, which led to the chocolate company's 10% share increase.

A deal that will be quite historic, if it is well achieved, can create the world's biggest snack global maker earning nearly $50 billion in combined annual sales. Hershey is best known for Reese's Peanut Butter Cups and Kisses, while Mondelez is a popular household name through Oreo and Toblerone.

In 2016, Hershey previously turned down a $23 billion takeover proposal from Mondelez. Today, BBC reported that it is still yet to be known if that would amount to a deal if discussions about the proposal go through the current proposal. One of its biggest concerns is the Hershey Trust Company, as it's a charitable trust holding the voting control that allows it to operate in Hershey. The group has denied several takeover opportunities, meaning that its approval shall be important for any merged operations.

Challenges in the Chocolate Industry

A potential merger occurs when the packaged food industry experiences slower growth. The cocoa prices have increased, forcing chocolate companies such as Hershey to increase their prices, which affects the demand from customers.

Last month, Hershey reduced its revenue and profit estimates, citing cocoa costs as the largest driver of inflation. Kraft Heinz and other food companies have also reduced their forecasts as consumers cut back on spending because of price increases.

For Mondelez, Hershey's acquisition can unlock new markets and further boost its position in the snacking and confectionary business. According to Reuters, analysts find such mergers more attractive lately as companies look to navigate challenging market conditions and rising costs. One of the recent examples includes the $36 billion Mars deal to acquire Pringles-maker Kellanova.

The merger could bring under one roof some of the most iconic brands in the business, but whether the Hershey Trust will back such a move is anybody's guess. Looking ahead, investors and industry watchers will observe new developments in the deal.

Both companies have declined to comment on these reports.