Nestle bypasses Hershey's, selling its candy business to Italian company

Nestle new portfolio

Swiss food and drink giant Nestle is selling its USA candy business to Italy's Ferrero for about $2.8 billion in cash.

The sale of the unit, which includes the Butterfinger and Baby Ruth brands, is also the first major divestment by the Swiss food giant since Chief Executive Officer Mark Schneider took the helm a year ago.

Nestle, a massive food and beverage company based in Switzerland, is well-known for its chocolate and candy like 100Grand, Raisinets, and Crunch.

Hershey has the license for KitKat in the U.S. But Nestle still owns the brand and it's not part of the Ferrero deal. Nestle said in a statement announcing the sale that it remains "fully committed" to its chocolate business around the world.

Nestle US candy business registered sales of some 900 million Swiss francs in 2016, in a market worth an overall US$8 billion, according to Ibis World.

Ferrero, the world's third largest confectionery company, will acquire 20 American brands including Laffy Taffy, Wonka and Butterfinger.

"We look forward to welcoming the talented team from Nestle to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market", Giovanni Ferrero, executive chairman of the Ferrero Group, said in a release.

Hershey did not win its latest bid to consolidate its leading position in the USA retail chocolate market, but that may not be a bad thing.

The Nestle Ferrero transaction is expected to close around the end of March, the company said in a news release.

Ferrero was founded as a family business in Alba, Italy, in 1946, and entered the US market in 1969 with Tic Tac breath mints.

Nestle said it only represented around three per cent of its overall U.S. sales.

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