Ferrero Acquires Nestlé’s US Confectionary Business

On Tuesday, one of America’s biggest candy and chocolate companies, Nestlé, had announced that Ferrero will be acquiring its US confectionery business. The $2.8 billion deal is expected to close near the end of this year’s first quarter after customary approvals and closing conditions are complete.

After the acquisition, Ferrero will own over 20 American confectionery brands including Wonka, Crunch, Baby Ruth, Butterfinger, 100 Grand, LaffyTaffy and more. This deal is the third acquisition Ferrero made in the past year, making it the third-largest confectionery company in the US.

“With Ferrero we have found an exceptional home for our US confectionery business where it will thrive. 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,” said Nestlé CEO Mark Schneider in a press release.

Nestlé’s US confectionery sector represents three percent of the entire company’s sales in the states. The acquisition only involves US confectionery brands and does not include any other brands under Nestlé’s portfolio such as their growth brand Toll House. The company will still be focusing efforts on growing their global confectionery products including their international brand KitKat.

In 2016, Nestlé brought in sales of around $27 billion in America alone, making the US the largest market for the company. About 97 percent of homes in the US have Nestlé brands in their cabinets and fridges; products under their Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffers labels are the most popular. With over 120 locations, 50,000 employees across the US, 77 factories and 10 R&D centers, Nestlé has a large footprint in America.

Ferrero is likely to reduce their expenses after the acquisition as they will be able to reduce production costs. The business move could also help the Nutella manufacturer to dominate the confectionery business in the US, which remains a strong category. The iconic brands under Nestlé’s confectionery roster are easily marketable as well because consumers are already familiar with the products.

“We are very excited about the acquisition of Nestle’s US confectionery business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness,” Giovanni Ferrero, executive chairman of the Ferrero Group, said in a statement.  “We look forward to welcoming the talented team from Nestlé to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market.”

Ferrero’s investment in the confectionery sector is unique to the segment as many confectionery manufacturers are investing in healthier products. Mars’ recent acquisition of a minority stake in Kind and Hershey’s acquisition of Amplify Snack Brands is indicative of the confectionery business’s decline in sales.

So far it is not clear as to how Ferrero will bolster Nestlé’s confectionery brands in the US. After the acquisition it’s likely the company will release new products under these brands.

“Our commitment to deliver value to the North American consumers and customers will be strongly enhanced by the arrival in our portfolio of such powerful confectionery and chocolate brands,” said Lapo Civiletti, CEO of the Ferrero Group.