Is the maker of the Nutella chocolate spread about to gobble up Nestlé’s U.S. sweets business? Ferrero, the historic chocolate company owned by Italy’s richest family, is attempting the biggest takeover in its history, worth $3 billion. The food group based in Alba, northern Italy, the third in the world of chocolate, has the sweet snack division of the biggest food multinational in the world in its sights, according to reports.
For Ferrero, this would be an unprecedented attack on the lucrative U.S. market. To do it, it would have to look for a big target: the confectionery division of Nestlé which the Swiss food company has placed the “For Sale” sign on.
Based on rumors reported by the news agency Dealreporter, Ferrero has hired an investment bank to study the dossier. Ferrero has already expanded in the U.S. market with the purchase of Fannie May Confections Brands, a producer of quality chocolate, for $115 million in cash. On its part Nestlé announced on June 15 that it was exploring strategic options for its U.S. confectionery division, including a potential sale.
The division includes products such as Butterfinger and BabyRuth and would be valued at about $3 billion. It generated about $900 million turnover in 2016. For Ferrero, it could be a big opportunity for growth in the U.S.
“We do not comment on speculation,” was the response from Alba. If it is seen through, this would be Ferrero’s second acquisition in 2017, and the second in the U.S. This is a sort of “Copernican revolution” for Ferrero, where for decades the philosophy of founder Michele was “No finance, no acquisitions,” a line that the company had remained faithful too. However, already two years ago, Ferrero bought Britain’s Thorntons.
Ferrero launched in the U.S. in 1969 with TicTac sweets, and today it has about 225 employees in the country, which represents the fifth market for the Italian group. Founded in Chicago in 1920, Fannie May is also a historic brand which does not have distribution in supermarkets and bars, but only distance selling (online, telephone and TV, relying on a small network of 80 shops). This time Ferrero could benefit from Nestlé’s move: the Swiss multinational in the United States has put its “sweet confectionery” division up for sale; in Italy in 2015 it lost €15 million and now it wants to halve its employees in Perugina, another historic Italian brand.
The year 2017 has started with the internationalization trend for Ferrero: beyond the U.S., the company has also expanded in Asia. After the opening of a production plant in China in 2015, an innovation center has been launched in Singapore. This is the second research pole for the group after that of the central office in Alba. The Asian market, along with the U.S., is one of the most interesting in terms of prospects.
If Europe, in particular Italy, France and Germany, make up two thirds of Ferrero turnover, in China Ferrero can count on a “confectionery” market share that has risen to 27% and revenues at December 31, 2016 at $510 million.
Ferrero saw its overall turnover rise 8.2% in the last fiscal year. “An exceptional year,” was how they defined it in Alba: consolidated net profit came close to €800 million, up 54%. This was also thanks to the acquisitions made in 2015, from Oltan, a significant hazelnut producer, to Thorntons, the Delacre biscuit maker and Fannie May.