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Nestlé sweet on US confectionery sale
Posted on Friday, 16 June 2017 08:43
Nestlé is stepping away from its US confectionery arm as consumers in the States are becoming more health conscious and amid fierce regional competition as chocolate makers try to gain traction on weak consumption.
While the country represents the Swiss food and drink powerhouse’s largest market with sales of CHF 26.70 billion (USD 27.43 billion), the flagged business only accounted for about 3.0 per cent of this figure.
Nestlé is exploring “strategic options”, code-word for a potential sale, of the manufacturer of local brands such as BabyRuth, Butterfinger and Nerds and the international chocolate label Crunch.
The Financial Times (FT) cited a note earlier this year by Kepler Cheuvreux analyst Jon Cox which indicated the company is only fourth by market share in the country and a divestment could be worth roughly USD 2.00 billion.
Cox added its sales are under pressure from other players currently dominating modern retail channels – for example, Mars, Hershey and Swiss competitor Lindt & Sprüngli are all vying to win over consumers.
Meanwhile Alain Oberhuber, an analyst at MainFirst Bank, told Bloomberg the divestment is a first step toward health and wellness and it is clear Nestlé is just too small in the US confectionery segment.
Nestlé stressed it would retain Toll House chocolate chips and baking products and KitKat, the international banner accounted for within global confectionery, a segment with sales of CHF 8.80 billion in 2016.
Furthermore, the company said it would “continue to invest and grow in the US, where it has leadership positions across a large number of categories such as petcare, bottled water, frozen meals, infant food and ice cream”.
The Financial Times noted this global chocolate brand is sold in the US under licence by Hershey, which together with Mars controls almost half of the market and could well be a possible buyer of the unit.
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