Ferrero buys Nestlé's US confectionery business
After positioning itself more firmly in the health market, Swiss food giant Nestlé announced Ferrero has bought its US confectionery business for US$2.8 billion.
Nestlé claimed the motivation behind the sale was its weak position compared to rivals Hershey, Mars Inc and Lindt in the US, as consumer preference has turned towards healthier snacks and premium chocolate. Therefore, the acquisition will see Ferrero take over a number of chocolate brands including BabyRuth, Butterfinger and Crunch, but Nestlé will continue to operate its confectionery business outside of America.
This comes after Nestlé announced the sale of Australian chocolate bar Violet Crumble, and its acquisition of vitamin maker Atrium Innovations.
CEO Mark Schneider suggested that this sale marks the company’s shift towards offering more varied, healthy products. He said the deal “allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition”.
Referring to Nestlé’s move away from chocolate and towards vitamins, Vontobel analyst Jean-Philippe Bertschy said: “The switch of assets makes a lot of sense. You’re going out of a weak business in terms of financials and ... entering a market with strong growth and higher margins.”
For Italy-based Ferrero, on the other hand, the cash deal strengthens its position in America, which accounts for nearly 19% of the global chocolate market, according to Euromonitor. By expanding on its brands Tic Tac, Nutella and Ferrero Rocher, the sale will make the company the third-largest chocolate company in the US and globally.
“We will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionery and seasonal categories, and exciting new growth opportunities in the world’s largest confectionery market,” Ferrero Group Executive Chairman Giovanni Ferrero said in a statement.
Since 2014, Ferrero has also expanded its confectionery business with the acquisition of British chocolatier Thorntons, and invested in the hazelnut market with acquisition of Turkish-based Oltan Group.
It is predicted that the sale will be finalised by the end of March.
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