Nestle mulling sale of its nearly US$1 bn confectionary business in the US

Nestle may sell its roughly US$900 million-a-year US confectionery business, which includes Butterfinger and BabyRuth, in the Swiss food group’s latest effort to improve the health profile of its sprawling portfolio.

The world’s largest packaged foods maker said on Thursday it would “explore strategic options”, including a possible sale, for the business that also includes 100Grand, SkinnyCow and Raisinets.

Analysts have been speculating that Nestle could exit the US confectionary business which is not in line with its stated strategy of becoming more health and nutrition-focused.

That strategy, underlined by last year’s naming of a health care veteran as CEO, comes as the whole packaged food sector battles a slowdown from a new generation of savvy consumers that are eating fresher and healthier foods.

The review is limited to the United States, where Nestle does not control its key KitKat brand, and is No 4 behind Mars, Hershey and Mondelez International.

With annual sales of 900 million Swiss francs (US$923 million), the US confectionery business accounts for only 1 per cent of company sales. Nestle’s other products range from instant coffee to mineral water and baby food.

“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,” said RBC Capital Markets analyst James Edwardes Jones in a note.