Nestle to sell U.S. candy business to Nutella maker Ferrero

Jan. 16 (UPI) -- Nestle agreed to a $2.8 billion cash deal to sell its U.S. confectionery business to Ferrero, the maker of Nutella, the companies announced Tuesday.

Swiss-based Nestle announced in a release it expects to complete the deal with the Italian company by the end of this year's first quarter.

Nestle is the world's largest food and beverage company, with more than 2,000 brands -- including baby foods, bottled water, cereal, coffee, frozen food, dairy, drinks and pet care.

The sale does not include Nestle's Toll House baking products and its leading international confectionery activities around the world, including its global brand KitKat.

Overall, the company's U.S. sales were around $27 billion in 2016.

Nestle's U.S. candy business represents about 3 percent of the U.S. group sales, around $900 million. Chocolate products include Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry! and SnoCaps, as well as local sugar brands SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.

But its American candy business has been declining along with similar companies, including U.S.-based Hersey, which recently cut 15 percent of its workforce, Bloomberg reported. Mars, which includes M&M, is the No. 1 candy company in in the world, according to Candy Industry.

"With Ferrero we have found an exceptional home for our U.S. confectionery business where it will thrive," Nestle CEO Mark Schneider said. "At the same time, this move allows Nestle 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."

Ferrero has been seeking a larger presence in the United State and will become the third-largest confectionary company in the U.S. market. Last year, it acquired Ferrara Candy Co., the maker of Red Hots, Lemonhead and Brach's candies, as well as confectioner Fannie May.

"We look forward to welcoming the talented team from Nestle to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market," Giovanni Ferrero, executive chairman of the Ferrero Group, said in a release.

Ferrero will acquire Nestle's U.S. manufacturing facilities in Illinois.

Ferrero was founded as a family business in Alba, Italy, in 1946, and entered the U.S. market in 1969 with Tic Tac breath mints. It has been making Nutella since 1964.

Ferrero, the third-largest company in the global chocolate confectionary market, had global sales of more than $12 billion in 2016.

Nestle was formed in 1905 with the merger of the Anglo-Swiss Milk Company, established in 1866 by brothers George and Charles Page, and Farine Lactee Henri Nestle, founded in 1866 by Henri Nestle.