Dive Brief:
- Leaf Brands, the maker of Hydrox sandwich cookies and owner of a half-dozen legacy candy brands, has said it will make a bid on Nestle's U.S. candy business, according to The Orange County Business Journal. The company is relatively tiny compared to the Swiss powerhouse — it posted $5 million in annual sales last year, compared to $922 million reported by Nestle’s U.S. confectionery business.
- Leaf's main product is its Hydrox sandwich cookies, along with two former Nestlé products, Wacky Wafers and Tart ‘n Tinys. Leaf CEO Ellia Kassoff said new and relaunched products, along with a big marketing push, are expected to quadruple the company's sales in 2018.
- Leaf is one of several bidders expected for Nestle's U.S. candy business, with Ferrara Candy being another contender. “We know (more) about Nestle than most of the other bidders [that] have limited or no candy industry experience,” Kassoff told the business publication, explaining that distribution would be “a huge advantage” for a combined company. He also said the bid is likely to receive less antitrust scrutiny from the Federal Trade Commission.
Dive Insight:
Ellia Kassoff seems undaunted by his company's minor player status in the Nestle bidding scene. “We’re obviously the small guy, but we’re the value-add guy,” he told OCBJ, adding that his firm brings expertise in operations and in the industry at large. Leaf currently sells its products in about 3,000 locations, including Kroger stores, Big Lots and Cracker Barrel.
Nestlé announced earlier this summer it would entertain offers for its U.S. candy operations, though the deal won't include its well-known Toll House baking products. The Switzerland-based company said it would continue investing in the U.S. and planned to expand its pet care, bottled water, frozen meals, infant food and ice cream products.
Nestle's sale of its U.S. candy business is making waves in an already fiercely competitive market. Hershey —which makes Reese's, York Peppermint Patties and its namesake chocolate bars — and Mars — whose brands include Twix, Snickers and M&Ms — together control nearly 75% of the market in 2016. Both of those companies are expected to bid on parts of Nestlé's candy business.
Mondelez International, whose brands include Oreo and Cadbury, was considered a likely bidder for Nestle's candy business until CEO Irene Rosenfeld indicated the company was "quite satisfied" with its current portfolio and planned to continue expanding into the chocolate market both in the U.S. and China.
According to market share data from Nielsen for the 52 weeks ending Oct. 8, 2016, Nestlé was in fifth place in the U.S. confectionary market behind Hershey, Mars, Mondelez and Lindt/Ghirardelli.
Given the size of Leaf Brands' competition, it seems unlikely that it will see a deal with the coveted candy brands. Still, Kassoff told OCBJ that the offer is serious. It will be interesting to who does manage to snag Nestle's U.S. candy business, and how the deal will shape the competitive sweets industry.