Nestle SA might 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 healthcare.
A sale of the US sweets unit, with revenue of about 900 million francs (US$924 million) last year, would be the first major strategic decision by chief executive officer Mark Schneider, who became the Vevey, Switzerland-based company’s head this year after a career in medical products and pharmaceuticals.
“It’s a first step away toward health and wellness,” MainFirst Bank AG analyst Alain Oberhuber said. “It became clear that Nestle is too small in confectionery in the US.”
Photo: AP
Lindt & Spruengli AG 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 percent.
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 nearly a century.
Nestle has since 2011 been investing heavily in a health-science unit and has said it aims to make a US$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 on Thursday in a statement 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 last year amid fierce competition.
While some investors and analysts have said a company focused on better nutrition should not produce sweets, Nestle said 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.
Nestle said it would complete its strategic review by the end of the year, which does not include Toll House chocolate chips and baking products.
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