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Nestle Sells US brands to Ferrero for $2.8bn

Nestle is selling its US sweets and chocolate business to Ferrero Group for 2.7bn Swiss Francs ($2.8bn; £2bn).

The Swiss food giant said it was offloading brands such as Crunch, Nerds, Runts and Butterfinger to focus on other products.

Italy’s Ferrero, which makes Nutella spread, Tic Tac and Ferrero Rocher, will become the US’s third biggest confectionery maker.

Nestlé’s 2016 U.S. confectionery sales reached about $900 million. It confectionery business represents about three per cent of U.S. Nestlé Group sales.

It brands includes popular local chocolate brands such as Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky,
OhHenry! and SnoCaps as well as local sugar brands such as SweeTarts.

The transaction is expected to close by March following the completion of customary approvals and closing conditions.

Ferrero said the brands would give it “substantially greater scale” and “a broader offering of high-quality products” for US customers.

The US confectionary market is the largest in the world, worth about $8bn a year according to Ibis World.

But Nestle lags behind the likes of Mars, Hershey and Lindt, and said its candy business made up just 3% of its US sales.

Nestlé CEO Mark Schneider said in a statement that the move would allow Nestlé to invest and innovate across a range of categories where there are stronger future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition.

These include pet care, bottled water, coffee, frozen meals and infant nutrition, he added.

Some analysts see the decision to get rid of the business, which also includes children’s favourites like Laffy Taffy, Chewy Gobstopper and BabyRuth, as another step by Nestle to focus on healthier products.

Since Schneider took over last year, the Swiss business has bought companies that make vegetarian meals, vitamins and luxury coffee.

However, Nestle has said it is still wholly committed to its international chocolate brands such as KitKat.