Nestle Sells U.S. Confectionery Business to Ferrero on Path to Healthier Products

FILE PHOTO: The Nestle logo is pictured on the company headquarters entrance building in Vevey, Switzerland February 18, 2016. REUTERS/Pierre Albouy/File Photo

Swiss food group Nestle has agreed to sell its U.S. confectionery business to Italy’s Ferrero for $2.8 billion, it said Tuesday, marking CEO Mark Schneider’s first big sale and a small step on its path toward healthier products.

Nestle, the world’s biggest packaged-food company, has cited its weak position in the United States, where it trails Hershey, Mars and Lindt as the rationale for a sale.

But reduced exposure to chocolate also fits Nestle’s goal of becoming a “nutrition, health and wellness” company. Though Nestle is hanging on to non-U.S. confectionery operations, bankers and analysts have said it might wind down its interest further.

Nestle’s U.S. business, home to mass-market products BabyRuth, Butterfinger and Crunch, has been underperforming rivals for years as consumers have turned increasingly toward healthier snacks such as fruit bars and premium chocolate brands such as Lindt.

The change of focus has prompted Nestle to bid for the vitamin and supplements business being sold by Germany’s Merck after agreeing last month to buy vitamin maker Atrium Innovations.

“The switch of assets makes a lot of sense,” Vontobel analyst Jean-Philippe Bertschy said of the U.S. disposal and move into vitamins. “You’re going out of a weak business in terms of financials and … entering a market with strong growth and higher margins.”

For family-owned Ferrero, meanwhile, the proposed deal offers a chance for the Italian company to build scale quickly in the United States. The maker of Nutella spread and Ferrero Rocher pralines will become the third-largest chocolate company in the United States and globally, according to Euromonitor International.

SOURCE: Reuters, Martinne Geller and Francesca Landini

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