Nestle To Pull Out Of American Candy Markets?

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Rumor has it that candy producing giant Nestle might be selling its $900 million-a-year U.S. business, which includes household candy names like Butterfinger and BabyRuth. This is, apparently, to improve the health of their overall portfolio.

Analysts have been speculating about the decision since the company named healthcare veteran Mark Schneider as CEO. Over the past few years, the packaged food sector has battled a slowdown due to a generation of savvy consumers that are eating healthier and fresher foods.

As a result, the company has stated its new strategy is to become more health and nutrition-focused.

The review appears limited to the United States, where Nestle is number four behind Mars, Hershey, and Mondeles International in the candy market. The U.S. Market is just 10% of the total company sales.

RBC Capital Markets analyst James Jones notes that this could be a significant move by the company in the long run, despite the low sales loss.

“This might seem small stuff, but in our view, it could be a significant step by new-ish CEO Mark Schneider…towards a more deliberate and efficient capital allocation strategy,” Jones said.

Nestle stated that it remains “fully committed” to growing its international markets, particularly KitKat, which is made by Hershey in the United States. Globally, the company generated around $9.02 billion in sales last year.

So far there has been no talk of what will happen to Nestle’s assets in the United States used for their candy production, or what will become of the workers employed there. No figures have been estimated about the number of jobs that would be affected by the transition out of the U.S. market.

Of course, no decision has been announced yet, and selling a business as large as Nestle involves a lot of legal, regulatory, and financial wrangling. According to the 2017 IBBA Market Pulse survey, “cash at close” is the most important issue for business owners who are selling their company. Even so, “taking care of employees” was their second biggest concern.

Until Nestle confirms its decision to sell off its holdings in the U.S. candy market, investors will continue to speculate.

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