Get the app today! Download iPhone App Download Android App

Nestlé May Sell Butterfinger, BabyRuth As US Cuts Sweets

Published on Jun 16 2017 9:43 AM in A-Brands tagged: Trending Posts / Chocolate / Nestlé / US Retail

Nestlé May Sell Butterfinger, BabyRuth As US Cuts Sweets

Nestle may sell Butterfinger, BabyRuth and other US confectionery brands as its new leader responds to sluggish demand for chocolate with a shift toward faster-growing businesses such as coffee and health care.

A sale of the US sweets unit, with revenue of about 900 million francs ($923 million) in 2016, would be the first major strategic decision by Mark Schneider, who became the Vevey, Switzerland-based company’s chief executive officer this year after a career in medical products and pharmaceuticals.

“It’s a first step away toward health and wellness,” said Alain Oberhuber, an analyst at MainFirst Bank AG. “It became clear that Nestle is too small in confectionery in the US”

The food industry is under pressure to reduce costs after Kraft Heinz Co.’s unsuccessful bid for Unilever earlier this year showed that even the largest companies in the industry could become targets. Chocolate makers especially are grappling with weak US consumption as Americans increasingly turn their backs on sugar. In March, Hershey Co. announced plans to cut 15% of its workforce six months after rebuffing a takeover bid from Mondelez International Inc.

Hershey, Mars

Lindt & Spruengli overtook Nestle as North America’s third-biggest chocolate producer in 2014, when it acquired Russell Stover. Hershey and Mars Inc. together control more than half of the market, according to Euromonitor data, which puts Nestle’s market share at 8.4%. In addition to chocolates like Raisinets, OhHenry! and 100Grand, the brands up for sale include SweeTarts, LaffyTaffy, Nerds, Gobstopper and Runts.

Schneider has said he aims to boost the company’s health strategy as well as focus on the businesses that are growing fastest, such as coffee and pet food. He previously led Germany’s Fresenius SE and is the first outsider to be given the Nestle CEO job in almost a century.

Nestle has been investing heavily in a health-science unit since 2011 and has said it aims to make a $10 billion business out of it, trying to develop food-related products to prevent ailments such as obesity, metabolic problems and Alzheimer’s disease.

The maker of Cailler, the brand that invented milk chocolate, said in a statement Thursday that it was launching a strategic review of the US confectionery business, possibly taking an initial step away from the industry after its sales of sweets declined for a fourth year in 2016. The US business has been particularly hard-hit amid fierce competition.

“This might seem small stuff, but in our view it could be a significant step by new(ish) CEO Mark Schneider,” James Edwardes Jones, an analyst at RBC Capital Markets, said in a note. “The possible disposal of the US business is not everything we had hoped for, but might be the start of something bigger.”

KitKat Brand

While some investors and analysts have said a company focused on better nutrition shouldn’t produce sweets, Nestle said Thursday it remains committed to its chocolate business in the rest of the world, especially its KitKat brand. Nestle produces KitKat outside of North America and has failed to convince Hershey to sell it the rights to the brand in the US.

Companies have spent $2.1 billion buying confectionery businesses in the last year, almost double the previous 12-month period, according to data compiled by Bloomberg. Since June 2015, the assets have fetched a median value of 18 times earnings before interest, tax, depreciation and amortization, the data show.

Nestle said it would complete its strategic review by the end of the year. It doesn’t include Toll House chocolate chips and baking products, the company said.

News by Bloomberg, edited by ESM. Click subscribe to sign up to ESM: The European Supermarket Magazine.

Share on Facebook Share on Twitter Share on Google+ Share on LinkedIn Share on Tumblr Share via Email