Nestle will get out of the chocolate business and will stop producing some of its famous brands like Nestle Crunch, Butterfinger, Baby Ruth, Raisinets, Nips and Laffy Taffy. But it’s not going to a losing scenario for the company as Nestle is selling its U.S. confectionery business to Italian chocolate and candy maker Ferrero for an estimated amount of $2.9 billion.
Nestle made the announcement on Tuesday. The company’s 2016 U.S. confectionery sales were more than $935 million which makes up only about 3% of U.S. Nestle Group’s sales. It has, however, a market share of 11.5 %.
CEO Mark Schneider said in a statement: “This move allows Nestle 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 big sale will not include Nestle’s global chocolate brand KitKat or the Toll House baking line.
Ferrero, on the other hand, is well-known for its Ferrero Rocher chocolates. The company also owns long-time customer favorites Nutella and Tic Tacs.
Nestle also owns Purina, Cofee-Mate, Gerber and Stouffer’s.
Nestle also said that the sale is expected to be completed near the end of the first quarter.
Another chocolate-maker giant The Hershey Co vied to acquire Nestle’s U.S. confectionery business and also submitted a final bid, along with Ferrero. Ferrero, according to business insiders, may have gained the edge because it was more willing than Hershey to be aggressive on price.
Hershey which also owns popular chocolate brands Kisses and Reeses holds 21 percent of the U.S. chocolate market. Ferrero had little U.S. presence.
The U.S. sweets industry has been facing challenges from a heightened emphasis and focuses on sugar and competition from so-called “better for you” snacks like popcorn and snack bars. Still, analysts say candy is too ingrained in American culture for it not to be appealing to investors.
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