Swiss-based food giant Nestle is weighing a possible sale for the company’s confectionery business, which generates over $920 million annually from the sale of popular brands including Butterfinger and SkinnyCow.
On Thursday, Nestle said it had launched a strategic review of the company’s U.S. confectionery business, a review that could result in a potential sale of several well-known sugar-packed snacks, including BabyRuth, Raisinets, Chunky, SnoCaps, Nerds and PixyStix. The review would also comprise the international rights for the Crunch chocolate brand, but won’t incorporate Nestle’s Toll House baking products, which the Big Food maker says remains a strategic growth brand in the U.S.
Nestle has said it plans to compete the review by the end of 2017.
The potential sale of the U.S. confectionery business comes just a few months after Nestle reported the company’s slowest global sales growth in over two decades, a performance that executives said actually outpaced the industry but were below internal expectations. The U.S. is Nestle’s largest market, generating billions in revenue from the sale of brands like Coffee-Mate, Gerber, and Purina. But the loss of the confectionery business would only impact 3% of U.S. sales.
The possible unloading of Nestle’s confectionery brands puts a big asset on the block. Nestle ranks third in the category in the U.S., commanding 6.7% of the market according to research firm Euromonitor. Only Mars and Mondelez (MDLZ) are larger. The overall category is actually growing strongly: U.S. confectionery sales jumped from $29.6 billion in 2011 to $33.7 billion last year, Euromonitor reports. That’s because while Americans are increasingly saying they want to eat healthier foods, indulgent snacks like ice cream, candy, and salty snacks are also posting increases. Consumers are snacking more throughout the day, a food consumption trend that benefits confectionery sellers.
Some Wall Street observers have called for consolidation within the Big Food landscape in the U.S., including in confectionery, which remains relatively fragmented. One big deal almost occurred last year when Mondelez tried to buy Hershey (HSY), a deal that ultimately failed to materialize because the latter company wasn’t interested in the union. Nestle’s move ultimately puts another batch of brands on the box for any Big Food maker aiming to add a jolt to their revenue at a time when many legacy brands are seeing cooling sales.
Nestle says that it will maintain a keen focus on building up U.S.-marketed brands that compete in the pet care, bottled water, infant food, and frozen meal categories.