Nestle is considering selling its confectionary business in the United States as it seeks to turn to producing healthier products. The U.S. confectionary business of the food giant generates revenues of about $900 million annually which is about 1% of the food giant’s overall sales. Some of the brands that this confectionary business owns includes BabyRuth, Butterfinger, Raisinets, SkinnyCow, and 100Grand.
For a long time there has been speculation among analysts that the Swiss food giant intended to get out of the confectionary business in the United States as it moves to transform all its businesses into units that are more nutrition and health-focused. The strategy was adopted following a slowdown in sales in the wider packaged food industry as consumers increasingly turn to healthier and fresher foods. Last year Nestle appointed a healthcare veteran to become the company’s chief executive officer.
“This might seem small stuff, but in our view it could be a significant step by new-ish CEO Mark Schneider … towards a more deliberate and efficient capital allocation strategy,” James Edwardes Jones, an analyst at RBC Capital Markets wrote in a note to clients.
Only in the United States
Selling of the confectionary business will only occur in the U.S. where the Swiss food giant lacks control of its KitKat brand and where it falls to the fourth position behind Mondelez International, Hershey and Mars. Nestle would consequently continue expanding its global confectionary business. On an international level, Nestle’s confectionary business generated revenues of approximately $ billion in 2016.
Last year Nestle’s sales grew by 3.2% and this was the slowest rate of growth for the company since 2000. It was also the fifth year in a row that the company was experiencing slowing growth. In its bid to seek new sources of revenues, Nestles has entered other areas such as nutritional and health sciences by investing or acquiring medical device and biotech firms. The company has also divested from underperforming businesses.
Nestle’s intention to sell its U.S. confectionary business is the just the latest deal in the international packaged food sector as firms find ways to increase profits in a market that it weak. After turning down a Kraft Heinz-takeover bid, reports indicate that Unilever is planning to sell its margarine business. And after Reckitt Benckiser Group acquired Mead Johnson, the company is disposing off its mustard business in France in order to pay the debt it incurred to finance the acquisition.