Nestlé has agreed to sell its US confectionery unit to Ferrero, the Italian maker of Nutella, in the first substantial step away from the candy industry by the company that invented milk chocolate.
The sale of the unit, which includes the Butterfinger and Baby Ruth brands, is also the first major divestment by the Swiss food giant since chief executive officer Mark Schneider took the helm last year.
Nestlé plans to focus on healthier and faster-growing categories like coffee, pet food and water, as the food industry grapples with a drop in demand for sugary products.
“Our commitment to invest in the US is as big as ever,” Nestlé USA chief Paul Grimwood said on a call.
Challenging Times
The US chocolate industry is in tumult. Hershey has been cutting 15% of its workforce, and Lindt & Spruengli recently reported its weakest organic sales growth since 2009, amid sluggish demand in North America.
The Nestlé unit, which also includes brands like Oh Henry!, Laffy Taffy and Nerds, is suffering a decline in revenue and had sales of about $900 million in 2016.
Nestlé said in a statement announcing the sale that it remains “fully committed” to its chocolate business around the world. That includes Kit Kat, which it produces globally except for the US, where Hershey Co. owns the rights.
Closely held Ferrero has been pushing harder into the US. Last year it snapped up Ferrara Candy, the maker of Red Hots and Lemonhead candies, as well as confectioner Fannie May.
Closing The Sale
The sale to Ferrero, which does not include the Toll House brand of baking products, is expected to close around the end of the first quarter, Nestlé said. The business represents about 3% of the Swiss company’s US sales.
Nestlé said in June that it was considering options for the US confectionery unit, saying that it had attracted significant interest from bidders in July. In December, the company said that it expected to sell the business in the first quarter of 2018.
Hershey, which was named as one of the potential bidders, last month agreed to pay $921 million for Amplify Snack Brands to expand into popcorn and potato chips/crisps.
News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.
