Dive Brief:
- Nestléis exploring strategic options for its U.S. confectionery business, including a potential sale,the company said in a statement.A decision is expected to be completed by the end of 2017.
- Nestlé’s U.S. confectionery business, which includes popular brands such as Butterfinger, BabyRuth, SweeTarts and Nerds, posted sales of about $922 million in 2016.The review does not cover Nestlé’s iconic Toll House baking products, a strategic growth brand which the company will continue to develop in the U.S. market.
- The Switzerland-based company said itwill continue to invest and grow in the U.S., where it has dominant positions across a number of categories such as pet care, bottled water, frozen meals, infant food and ice cream.
Dive Insight:
Nestlé's decision to explore options for its U.S. confectionery operations comes as food and business manufacturers are considering divesting units that are posting slower growth or no longer fit with the long-term vision of the company.
Nestle"regularly evaluates its businesses for strategic fit," aNestlé spokesperson told Food Dive in an email. "We have now come to the conclusion that rather than making the significant investment needed to become a leader in U.S. confectionery, it is the right time for us to focus on other growth opportunities."
Nestlé’s U.S. confectionery business's sales — including 100Grand,Raisinets,LaffyTaffy andRunts— accounted for a mere 3% of the company's total U.S. sales of $27.4 billion in the market last year. The U.S. is the largest market for the Switzerland-based food and beverage manufacturer. Globally, Nestle's confectionery operations had sales of about $9 billion last year.
"We usually aim to hold #1 or #2 positions in categories in which we operate, most often leveraging our global brands," aNestlé spokesperson said. "In the U.S. confectionery market we have a low market share, our brands are mostly local and Hershey holds the license for our global KitKat brand."
The U.S. candy business is a competitive sector with the likes of Hershey — the maker of Reese's, York Peppermint Pattie and its namesake bar — along with Mars whose roster of brands include Twix, Snickers and M&Ms.
The public's concern over sugar and growing distaste for packaged foods has forced some candy markers to branch out into other snacks and even outside of their own industry.Hershey has diversified beyond its standard chocolate portfolio to includepremium brands like barkTHINS, meat snacks likeKrave jerky and dried meat barsandbetter-for-you, protein-based products under the SoFit line. Even Mars, better known for its candy, hasdoubled-down on pet carefollowing its announcement in January to buy the animal-hospital chainVCA Inc.for about $7.7 billion.
At a time when human food isn’t growing as quickly, the deal may make more sense for Mars than buying another snack business, said Ken Shea, an analyst at Bloomberg Intelligence said in January. “They see growth and they see diversity,” he told Bloomberg. “Why double down on food when it’s not growing that fast?”
It remains to be seen what path, if any, Nestlé ultimately decides to take with its U.S. candy operations. It could sell the division, spin it off or merge it with another candy maker's operations to extract synergies in operations and savings through ingredient purchases such as sugar and cocoa. It could ultimately decide to retain the unit, but it doesn't appear the company will choose that path.
