Nestle, the Swiss food company, has decided to sell off its US chocolate and sweets business to Italy’s Ferrero Group for 2.7 Bn Swiss Francs ($2.8 Bn; £2 Bn). This move will come about as a strategy for Nestle to concentrate on their other products by jettisoning sweet brands such as Runts, Nerds, Butterfinger and Crunch.
The Ferrero Group, best-known for Ferrero Rocher, Tic Tac and Nutella spread, will go on to become the third biggest confectionary manufacturer in the United States. According to Ferrero, the acquired brands will give “a broader offering of high-quality products” for US consumers and give the company “substantially greater scale”
According to Ibis World, the US confectionary market is the world’s largest with over $8bn a year. However, Nestle struggles to compete with brands such as Hershey, Mars, and Lindt; also, its candy business makes up only 3% of its sales in the US.
According to Mark Schneider, Nestle’s Chief Executive, this deal would benefit Nestle as it will help it to “invest and innovate” in a market which it already leads or other markets where it can see better future growth. These markets include frozen meals, infant nutrition, pet care, coffee and bottled water.
According to a few Analysts, Nestle’s decision to drop brands, which also happen to be children’s favourites such as Chewy Gobstopper, Baby Ruth and Laffy Taffy, is a step to concentrate on healthier products.
The Swiss giant has acquired businesses that manufacture vitamins, luxury coffee and vegetarian meals ever since Mr. Schneider took charge. However, the company vows to stay committed to its international brands of chocolate such as KitKat. Not on this, the company is in the talks of opening up its first ever factory in Japan over high demand for “exotic” varieties of KitKat.