Italy’s Ferrero seems to be a frontrunner
The US (SPY) packaged food business is witnessing consolidation as more prominent brands are eyeing acquisitions and divesting non-core brands. These efforts are intended to strengthen their competitive positioning and revamp their product portfolios amid a challenging retail landscape. Low consumer uptake reflects a consumer shift toward healthy foods.
Amid this environment, Nestlé plans to sell its US chocolate business and received bids from Hershey (HSY) and Italy’s Ferrero, as reported by CNBC. Ferrero is reported to be nearing a deal to acquire Nestlé’s chocolate business for ~$2.8 billion. Earlier reports suggested that Nestlé’s US confectionery business, including the Baby Ruth and Butterfinger brands, is valued at $2.0 billion–$2.5 billion.
Impact on Hershey
Ferrero outbidding Hershey (HSY) could be a blessing in disguise for the company as the US confectionery market has recently shown slow growth. The industry is caught between an anti-sugar trend and rising demand for healthy snacks. This trend could be a possible reason behind Nestlé’s planned divestiture of its confectionery business in the US.
Major packaged food manufacturing companies in the US have been moving away from high-sugar products. These companies have strengthened their wellness foods portfolio through innovation and acquisitions.
Campbell Soup (CPB) acquired Snyder’s–Lance, Kellogg (K) acquired Chicago Bar Company, and Conagra (CAG) fortified its portfolio with the acquisition of Angie’s Artisan Treats. Hershey acquired Amplify Snack Brands, the maker of the ready-to-eat SkinnyPop popcorn brand, which is in line with consumers’ changing preferences.
If Ferrero acquires Nestlé’s candy business, it could fortify its competitive positioning and become the third-largest confectionery player in the US. Currently, Hershey ranks first and is followed by Mars.