- The Ferrero Group, parent company of Nutella, Kinder and Tic Tac, will acquire Ferrara Candy, the maker of Brach's, RedHots and Trolli, from private equity company L Catterton, according to Food Business News. Ferrero will operate Ferrera as a separate unit.
- Ferrero will gain several assets through the deal, including four manufacturing plants, two distribution centers and an engineering and R&D center. The acquisition is expected to close in the fourth quarter of 2017.
- “With this acquisition, we are continuing to increase our overall footprint and product offering in the important U.S. market, establishing a presence in new confectionery categories with attractive growth prospects, including gummy and seasonal candies,” Giovanni Ferrero, executive chairman of the Ferrero Group, told Food Business News. “We look forward to continuing to grow the Ferrara business, investing in its brands to support expansion plans, leveraging its U.S. manufacturing plants and distribution centers, and creating opportunities for its talented people.”
Ferrero's move into the gummy and novelty candy space seems like a savvy investment. Gelatin-based confections are viewed by some consumers as healthier than chocolate, perhaps due to the rise of gummy vitamins marketed toward both adults and children. This category is also considered more experiential and innovative than more traditional candies, which could help Ferrero capture a new kind of consumer.
But the most obvious benefit of the acquisition is the facilities. These manufacturing plants, distribution hubs and R&D centers will help the company take a bigger bite out of the U.S. candy market — a space that's becoming increasingly competitive and unstable, even for some traditional big players. In June, Nestle announced plans to sell its $925 million U.S. confectionery business. A company spokesperson told Food Dive via email that "rather than making the significant investment needed to become a leader in U.S. confectionery, it is the right time for [them] to focus on other growth opportunities."
Analysts speculated that Nestle's move would spur further industry consolidation. Credit Suisse analyst Robert Moskow wrote in a note in June that Nestle's decision to sell "represents a compelling opportunity for U.S. candy companies to consolidate the category at a critical moment. Consumers have cut back on sugar-based snacks and shifted more shopping online."
Several suitors have displayed their interest in Nestle's business. In July, Ferrera was actually reported to be interested in Nestle's U.S. candy business. This move came after the company tried unsuccessfully to sell itself for more than $1.3 billion.
It's possible that Ferrero's decision to snap up Ferrara was made in anticipation of an intention to acquire Nestle's confectionery brands. The company has been rumored as a potential suitor, and has not said anything about what it may do. It will also be interesting to see if this purchase will pressure other companies to pursue partnerships as a means of future-proofing against a Nestle deal.