NACS Show 2017

Peeps producer Just Born ‘interested’ in buying some Nestlé US candy brands

23-Oct-2017 - Last updated on 23-Oct-2017 at 16:39 GMT

Some of Nestlé's chocolate brands are appealing to Just Born.

Just Born says it is interested in buying some of Nestlé’s candy brands, such as Rainsinets and Goobers, if the food giant sells its US confectionery unit to multiple companies.

Earlier reports showed Nestlé was trying to sell its US candy division by the end of the 2017. Some of the bidders include Hershey and Leaf Brands, as well as Ferrara Candy, which will be acquired by Ferrero.

Stronger ‘theater box’ company

Matt Pye, recently promoted as Just Born’s senior VP of sales and marketing, told ConfectioneryNews at the NACS Show (Oct 17 to 20, 2017) in Chicago, “(Rainsinets and Goobers) are in national distribution… we would love to be able to take and nurture them alongside Mikes and Ikes, and Hot Tamales to make us a much stronger ‘theater box’ company.”

Just Born has been operating since 1923, but the company only has three national brands in its portfolio, Pye pointed out. “Peeps is seasonal; Peanut Chews is regional. So adding a national brand would be great to our portfolio,” he said.

Meanwhile, Just Born is also actively investing in its chocolate segment as the category is “twice as large as non-chocolate,” Pye said. Thus acquiring a chocolate brand makes sense for the company.

But the question is: What would the Peeps maker do to grow Nestlé’s brands if the deal comes to fruition?

“A lot of the unknown factors include whether the plant comes with it or not,” Pye said. “There would be a lot of behind-the-scene [meetings] and infrastructure [changes]. Is it something we can make in our Peanut Chews facility? Because that is where we make chocolate that contains nuts. There would be allergy statements we have to deal with.”

He added Just Born has the ability to revitalize Rainsinets and Goobers through digital advertising and social media as these brands have been ignored by consumers for a long time.

Pye said Just Born is currently not bidding for Nestlé’s business, “because we cannot swallow the whole thing… but certainly we would love to take some of the ‘jewels and diamonds in the rough’.”

“From what I understand, Nestlé prefers to sell [US candy unit] in its entirety. Somebody is probably going to buy the whole thing and break it up,” he said.

Nestlé may sell candy business to multiple companies

While Just Born does not expect to take the whole Nestlé’s candy portfolio, a source who refused to be identified told ConfectioneryNews it is possible Nestlé may sell the unit to multiple firms.

“[Nestlé] has got sugar and chocolate products. Maybe somebody buys it and spins some brands off,” the source said.

At NACS, Nestlé showcased several new confectionery varieties, and it planned on bringing them to the US market later this year and early 2018.

These products include Butterfinger n’ Naked, Butterfinger Dark, Butterfinger peanut butter crisp bar, Crunch Dark, SweeTarts sour gummies made without artificial flavors or colors, SweeTarts soft and chewy ropes, as well as Big Chewy Nerds.

The sales of these new items will possibly affect the future parent company’s performance, the source added.

Pressure from activist investors

Nestlé previously said the reason to sell its US candy business was due to low market share in the category. However, industry experts including SmashMallow’s founder Jon Sebastiani see the deal differently.

“In my opinion, Nestlé’s exit of their US confections business is more about an activist investor that’s urging his company to create some liquidity within their overall portfolio rather than [Nestlé] selling it because of a weakness in the US confections space,” Sebastiani said.

“The obvious trend is that sugar content within any products is negatively viewed [by consumers]. I think many brands, and a lot of innovations are coming out with an ‘anti-sugar’ slogan, pushing consumers away from sugar, whether it be ‘sugar free’ or ‘less sugar’,” he added.

“But the reality is that sugar-based [products] are still a very large category in the US,” Sebastiani continued.

Commenting on the potential purchasers of Nestlé’s candies, Sebastiani said, “Hershey is a prime candidate."

“I understand there are private equity companies that are also looking into that,” he added. “It’s a real unique opportunity for any buyer because [Nestlé] has many iconic brands.”