Nestle sells US sweets arm for $2.8bn

Nestle sells US sweets arm for $2.8bn

Nestle has agreed to sell its US confectionery unit to Ferrero, the Italian maker of Nutella, for $2.8bn (€2.3bn) in the Swiss food giant’s first major divestment since chief executive Mark Schneider took the helm last year.

The sale of the unit, which includes popular US brands Butterfinger and Baby Ruth, is the first substantial step away from the confectionery industry by the company that invented milk chocolate.

The Switzerland-based company 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.

The US chocolate industry is in tumult. Hershey has been cutting 15% of its workforce and Lindt yesterday reported the weakest organic sales growth since 2009 amid sluggish demand in North America.

The Nestle unit, which also includes brands like Oh Henry!, Laffy Taffy and Nerds, is suffering a decline in revenue and had sales of about $900m in 2016. In a statement announcing the sale, it said it remains “fully committed” to its chocolate business around the world.

That includes KitKat, which it produces globally except for the US, where Hershey owns the rights.

Nestle said in June it was considering options for the US confectionery unit, and said it attracted significant interest from bidders in July. In December, it said 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 $921m for Amplify Snack Brands to expand into popcorn and potato chips. Earlier this month, it was reported that Ferrero was nearing a deal to acquire Nestle’s US confectionery business.

In November Nestle announced plans to reorganise its infant nutrition business to improve performance, five months after Mr Schneider listed the category as one of his priorities for growth.

The Swiss maker of Gerber baby food and Illuma formula said it was appointing regional managers

for the business to address local trends faster. Rival Unilever took a similar step, with business heads for different countries.

The changes come as global consumer goods groups like Nestle, Unilever and Procter & Gamble are under intense investor pressure to boost profit margins as sales slow from people migrating to smaller, independent brands.

Infant nutrition is a key battleground for Nestle and its rivals Danone and Reckitt Benckiser, which bought Enfamil infant formula maker Mead Johnson.

— Bloomberg

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