Nestlé to sell US confectionery business to Ferrero in US$2.8bn deal

Following months of speculation over who will step in to take over Nestlé’s US confectionery business since it first announced a “strategic review” and divestment last June, the producer of Nutella spread, Tic Tac and Ferrero Rocher has stepped in to seal the deal.

The Ferrero Group has emerged as the front-runner over the last couple of weeks, but alongside the Italian company, Hershey’s also showed a real interest as part of its diversification drive.

While many of the large US food firms are expanding their fields of operation to tap into the shifting preferences of health-conscious consumers, Ferrero is looking to make strides in the US market through this high-profile acquisition.

In the first half of 2017, Ferrero acquired Fannie May Confections from 1-800-FLOWERS.com, including the Fannie May and Harry London brands. This was followed in October 2017 by the purchase of Ferrera Candy Co, the number three non-chocolate confectionery company in the US, maker of brands such as Lemonheads and RedHots, from private equity firm L Catterton.

According to an article to be published in the February 2018 issue of The World of Food Ingredients, this is all part of considerable acquisition activity in North America recently.

As well as expanding its US confectionery footprint, this moved Ferrero into newer and potentially dynamic markets such as gummy and seasonal candies.

Founded in 1946, the company entered the US market in 1969 with its iconic Tic Tac breath mints, following this with other international brands such as Ferrero Rocher pralines and Nutella hazelnut spread.

Nestlé CEO Mark Schneider is extremely happy with the agreed sale to Ferrero. "With Ferrero, we have found an exceptional home for our US confectionery business where it will thrive,” said Nestlé CEO Mark Schneider.

“At the same time, this move 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.”

Nestlé’s 2016 US confectionery sales reached about CHF 900 million (US$934 million).

The transaction is expected to close around the end of the first quarter of 2018 following the completion of customary approvals and closing conditions.

Nestlé’s US confectionery business represents about three percent of US Nestlé Group sales. It includes popular local chocolate brands such as Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry! and SnoCaps, as well as local sugar brands such as SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.

The tran saction covers the US-focused confectionery brands only and does not include Nestlé’s iconic Toll House baking products, a strategic growth brand which the company will continue to develop.

A Nestlé statement says that the company remains fully committed to growing its leading international confectionery activities around the world, particularly its global brand KitKat.

With sales of CHF26.7 billion in 2016, the US is Nestlé’s largest market. Nestlé products can be found in 97 percent of US households under brands such as Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffer’s.

The company employs 50,000 people in more than 120 locations across the US, including 77 factories and 10 R&D centers.