Nestlé, the largest packaged-food company in the world, has announced that it will sell its U.S. candy business to Italian firm Ferrero, in a $2.8 billion deal.
This is the food group's first big sale under CEO Mark Schneider, and it's a major milestone toward turning Nestlé into a company that makes and sells healthier food.
Nestlé Selling U.S. Candy Business
The United States is the company's biggest market, but some units fare better than others. On Tuesday, Jan. 16, Nestlé announced the sale agreement with Ferrero and explained that the confectionary business in the United States does not have a strong position, as it's behind Hershey, Mars, and Lindt.
Consequently, it is selling the U.S. confectionery business for $2.8 billion in cash and expects the deal to complete sometime within the next couple of months, toward the end of the first quarter. For now, the deal is still pending closing conditions and customary approvals but should clear all hurdles by the end of March.
"With Ferrero we have found an exceptional home for our U.S. confectionery business where it will thrive," says 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."
The company adds that its U.S. confectionery business makes up roughly 3 percent of all sales from the U.S. Nestle Group. The candy business includes a number of popular brands such as Crunch, Butterfinger, Raisinets, and more.
KitKat Is Safe
The deal with Ferrero only covers U.S. confectionary brands but does not affect global brands such as KitKat. At the same time, the company's Toll House baking products will also remain unaffected by the sale. It adds that it will keep expanding its top confectionary activities worldwide, particularly the popular KitKat chocolate bar brand.
With its U.S. confectionery business under its belt, Italian firm Ferrero will become the third largest confectionery maker in the United States. The company already makes the popular Ferrero Rocher, Tic Tac, and Nutella spread, and Nestle's U.S. candy business will further consolidate its position in the U.S. market.
According to Ferrero, Nestlé's confectionery brands will allow for a greater scale, as well as a larger selection of high-quality products for customers in the United States. The U.S. confectionery market is the world's largest, worth roughly $8 billion per year.
Nestlé, meanwhile, plans to focus on other areas where it's already on top, or it has a greater chance of future growth. Such areas include infant nutrition, pet care, frozen meals, coffee, bottled water, and more.