Nestlé said earlier this year it might sell its confectionery business by the end of 2017 to focus on other categories where it has a stronger presence in the US.
Nestlé currently ranks fourth in the US confectionery market, according to Euromonitor data, with Mars, Hershey and Mondelēz being the top three players.
“We usually aim to hold number one or two positions in categories in which we operate, most often leveraging our global brands,” a spokesperson from the company previously told ConfectioneryNews. “In the US confectionery market, our brands are mostly local and Hershey holds the license for our global KitKat brand.”
Some of the domestic brands the company produces include Butterfinger, BabyRuth, 100Grand, SkinnyCow, Raisinets and Chunky.
Both Ferrara and Nestlé did not provide details on the potential deal. Nestlé said, “It is premature to speculate about specific outcomes of the ongoing strategic review of our confections business.”
A top-five player
Jared Koerten, lead analyst at Euromonitor, said if Ferrara were to succeed in acquiring Nestlé’s US confectionery business, it would emerge as a clear top-five player in the US confectionery market.
“Ferrara, alongside Lindt and Mondelēz, would form a clear tier of secondary competitors behind Hershey and Mars, and these top five companies would stand far above the rest of the competition,” he said.
“While Ferrara already owns a strong portfolio within sugar confectionery, Nestlé’s brands would provide a significant foothold in chocolate,” Koerten added. “This would help diversify Ferrara’s brand presence and also improve its standing within sugar confectionery as well.”
Develop snackfection offerings
The purchase of Nestlé’s chocolate brands could also help give Ferrara a vehicle for developing healthier snacking options, director of insight at Mintel, Marcia Mogelonsky, said.
“Nestle chocolate brands' new owner could innovate around better-for-you versions of the iconic bars, for example, Baby Ruth, something that Hershey is doing with its ‘snackfection’ products,” she said.
“Building up brands as ‘better for you’ is possible when the base is chocolate confectionery, but next to impossible when starting with a sugar confectionery platform, which is what Ferrara is facing now,” Mogelonsky added.
Ferrara, which was sold to private equity firm L Catterton in 2012, explored a possible sale to ex-Hershey CEO David West through an investment firm in December 2016.
Ferrara currently ranks fourth and sixth respectively in the US non-chocolate confectionery and overall confectionery categories, Euromonitor data showed.