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Ferrero SpA of Italy Finalizes the Purchase of Nestle Corporation

Ferrero Buys Nestle

Ferrero SpA of Italy has announced that it has finalized the deal to purchase the U.S. operations of Nestle Corporation. The acquisition is valued at $2.8 billion and brings more than 20 new confectionary brands to the Italian candy giant.

Last year, Nestle’s U.S. operations generated sales of $900 million marketing brands including Butterfinger, BabyRuth, 100Grand, Raisinets and Wonka. Ferrero will also get exclusive rights to the Nestle Crunch brand in the U.S. Expect a name change on that packaging and on candy brands that include SweeTarts, LaffyTaffy and Nerds.

Ferrero, which is perhaps most closely associated with Nutella, also makes Ferrero Rocher, Tic Tacs and Kinder. The company was able to wrestle the deal from the Hershey group in a contest to purchase the business. Ferrero will thus become the third-largest chocolate company in both the United States and the world. Ferrero also owns the Fannie May and Harry London chocolate brands, Trolli, Brach’s, Black Forest and Gummies.

Nestle’s U.S. unit has been underperforming rivals for a number of years, suffering from consumers’ preference for healthier snacks, such as fruit and nut bars, but it has also been losing market shares to premium brands such as Ferrero Rocher.

Ferrero will acquire Nestlé’s U.S. manufacturing facilities in Bloomington, Franklin Park and Itasca, Illinois. There are no expected layoffs of personnel based upon the acquisition and corporate operation offices in California, Illinois and New Jersey are expected to continue unimpeded.

Giovanni Ferrero, Executive Chairman of the Ferrero Group, said, “We are very excited about the acquisition of Nestlé’s U.S. confectionary business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness. We will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionary and seasonal categories and exciting new growth opportunities in the world’s largest confectionary market. We look forward to welcoming the talented team from Nestlé to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market.”

In the 1940s, Piera and Pietro Ferrero operated a pastry shop in Alba, Italy. In 1946, as a means of lowering expenses following the end of the Second World War, Pietro developed a chocolate-based confectionary product using hazelnuts and cocoa. The initial product came in solid loaves, which had to be sliced with a knife. This was succeeded by a spreadable version, initially called Supercrema. The product was a local success and the Ferrero’s converted their space into a factory and the product name became Nutella. Success soon followed and the company became the first Italian candy manufacturer after World War II to open production sites and offices abroad. A key to the Ferrero’s success was its effective sales network that was organized by Giovanni, Pietro’s brother.

The company saw a period of tremendous growth and success under Pietro’s son, Michele Ferrero and is now headed by Giovanni Ferrero. Prior to the acquisition, the worldwide Ferrero Group included 38 companies, 18 factories and approximately 21,500 employees. The amount of Nutella produced each year can fill about 1.5 billion eight-ounce containers.

Ferrero places great emphasis on secrecy. It has never held a press conference and does not allow media visits to its plants. Ferrero’s products are made with machines designed by an in-house engineering department. The Ferrero/Nestle deal is subject to customary closing conditions and regulatory approvals. It is expected to be completed in March.