Ferrero snaps up Nestlé’s confectionery business for $2.8bn

Nestlé has sold its US confectionery business to Italy’s Ferrero for $2.8bn in cash as the Swiss food giant shakes up its product portfolio.

Ferrero, known for its Tic Tac, Nutella and Ferrero Rocher brands, has typically favoured organic growth to acquisitions. However, it beat competition from Hershey and other rivals to acquire Nestlé brands such as Butterfinger and Baby Ruth.

For family-owned Ferrero, the cash deal offers the chance for the Italian company to build scale quickly and muscle further into the North America market.

It follows Ferrero’s purchase of Ferrara Candy, maker of Lemonheads and RedHots, from the L Catterton private equity group.

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Thanks to the deal, Ferrero is set to becoming the third-largest confectionery company in the US, according to Euromonitor.

Nestlé, the world's biggest packaged-food company, has cited the unit’s weak position in the United States, where it trails behind rivals Hershey, Mars and Lindt, as the reasoning behind the sale.

The deal also marks a consumer shift away from sugary foods which has led the Swiss company to focus on “nutrition, health and wellness,"

However, it says it is committed to its non-US confectionary business which includes well-known brands such as KitKat.

The acquisition only accounts for around 1% of Nestlé's sales, but is part of a wider portfolio shak-up by chief executive Mark Scheider.

"This move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition," Schneider said.