Nestle Considering Unloading Excess Weight from U.S. Candy

The candy market in the U.S. is not as sweet any longer for Nestle SA. The Swiss food behemoth is considering selling its business in the U.S. that makes sugary candy including well known products such as Butterfinger, LaffyTaffy and Crunch.

For many who are not fully aware, Nestle is much more than just chocolate and the anemic growth across the entire food industry in the U.S. had been driving the reshuffling of company assets as megamergers are being considered by heavyweights in the industry. Chocolate has not been shielded from the broader slowdown of the industry.

The projected annual growth rate over the upcoming five years for both sugar confectionery and chocolate in North America is just 2%, shows data from Euromonitor International.

Nestle’s business in specific suffered a drop in the first quarter of this year and has lost some of its market share. For business purposes it makes sense to move out of the market, as margins lag behind the company’s global average.

The products in its U.S. business are not in line with the company’s move toward foods that are healthier, even though Ulf Mark Schneider the new CEO said no contradiction exists between healthy eating and chocolate.

It appears that Nestle has finally listened to others that have said if the company was interested in moving forward with the U.S. candy business it would invest in it and if the company did not have plans to make that type of investment it should let it go so it stops dragging on the overall financial numbers.

As ways of boosting its sales as well as margins are sought by Nestle, Crunch and Butterfinger bars have been put on the chopping block.

The U.S. candy industry is dominated by Mars Inc. and Hershey Co. and both could be interested in scooping up the likes of Crunch and Butterfinger.

Whoever ends up buying the U.S. confectionery unit of Nestle would have a significant presence in the country that consumes more candy than any other.

Snacks company Mondelez International the maker of Sour Patch Kids and the iconic Oreo cookie could increase its offerings with strong names from Nestle.

While Mondelez was spun off from Kraft Foods in what was thought because of targeting international markets that were faster growing, it made a failed attempt at buying out Hershey in 2016.

Nestle’s U.S. confectionery industry generated over 900 million Swiss francs during 2016 or approximately $923 million.

Acquisitions of food companies can be two times sales or bigger for sustainable brands.

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