ACQUIRE - Ferrero Buys Nestle's US Candy Business for US$2.8B Cash

Ferrero the Maker of Nutella, Kinder and Ferrero Rocher Expands to Become 3rd Largest US Confectioner

Ferrero SpA the Italian company has sought to expand its footprint in the US. This acquisition is expected to add US$900M to Ferrero's US revenues annually when the transaction closes in March.


The Nestlé US unit, is being sold as the Swiss company seeks to shed candy and sugar products in favor of items such as coffee and pet food where it leads the market.


Nestlé CEO Mark Schneider commented: 

"With Ferrero we have found an exceptional home for our U.S. confectionery business where it will thrive. At the same time, this move allows Nestlé to invest and innovate across a range of categories where we see strong future growth and hold leadership positions, such as pet care, bottled water, coffee, frozen meals and infant nutrition."

Nestlé says its U.S. confectionery business represents about three percent of U.S. Nestlé Group sales. The group sells popular local chocolate brands such as Butterfinger, Crunch, BabyRuth, 100Grand, Raisinets, Chunky, OhHenry! and SnoCaps, as well as local sugar brands such as SweeTarts, LaffyTaffy, Nerds, FunDip, PixyStix, Gobstopper, BottleCaps, Spree and Runts.

About Ferrero:
Ferrero has grown from simple beginnings as a family bakery located in Alba, a town in the Piedmont region of Italy. From a small local business in 1946, Ferrero has grown to become the 3rd largest chocolate and confectionery producer in the world. Ferrero is also the largest producer and distributor of hazelnuts in the world.

About Nestlé:
With sales of CHF$26.7B in 2016, the U.S. is Nestlé’s largest market. Nestlé products can be found in 97 percent of U.S. households under brands such as Purina, Nestlé Pure Life, Coffee-Mate, Gerber and Stouffer’s. The company employs 50,000 people in more than 120 locations across the U.S., including 77 factories and 10 R&D centers.

Lawsuits Spread Regarding Allegedly Using Fish Caught by Slave Labourers

Right on the heels of the lawsuit against Nestlé for allegedly using fish caught by slave labourers is a lawsiut against Big Heart Pet Brands (owned by Smuckers) for allegedly importing pet food from suppliers that use slave labour.

One of the suppliers that Nestlé uses, Thai Union Frozen Products, has exported almost 30 million pounds of pet food into the United States. Thai Union has been linked with slave labour. Hagens Berman alleges that Big Heart Pet Brands also imports products from Thai Union and is therefore using products that were caught by slave labourers. Bergman said Big Heart Pet Brands does not disclose that they use fish caught by slave labourers and that violates California law.

The law firm that is representing Bergman states, “Based on our investigation and media reports, Hagens Berman attorneys believe that Thai Union relies on forced or slave labor to catch the fish used in fish-based Meow Mix-brand wet cat foods. These men and boys are victims of many human rights violations: they are trafficked from countries neighboring Thailand, sold to fishing boats by brokers and smugglers, and forced to work under physical violence, emotional abuse, and verbal threats. Reports by the New York Times and The Guardian have recently shed light on these inhumane working conditions.”

READ THE FULL ARTICLE

Nestlé Sued for Allegedly Using Fish Caught by Slave Laborers

The class action suit has been filed in the Central District of California for violation of California consumer protection laws. The case file states, “America’s largest and most profitable food conglomerates should not tolerate slave labor anywhere in their supply chains. These companies should not turn a blind eye to known human rights abuses or shirk from investigating potential human rights abuses by their suppliers, especially when the companies consistently and affirmatively represent that they act in a socially and ethically responsible manner. When these food conglomerates fail to uphold their responsibility for ensuring the absence of slave labor in their supply chains, their misconduct has the profound consequence of supporting and encouraging slave labor. And when these food conglomerates fail to disclose the use of slave labor in their supply chains to consumers, they are deceived into buying products they would not have otherwise and thereby unwittingly supporting slave labor themselves through their product purchases.”

Nestlé has a partner in Thailand, Thai Union Frozen Products PCL (Thai Union). According to United States custom documents Thai Union shipped in excess of 28 million pounds of seafood-based pet food into the United States. Thai Union is a vertically integrated producer, processor, and exporter of canned seafood and pet food. Thai Union uses fish that are sourced from “motherships”; motherships are large boats that collect fish from smaller fishing vessels and markets. Director of Anti-Slavery International, Aidan McQuade said, “If you buy prawns or shrimp from Thailand, you will be buying the product of slave labor.”

The case file states, “In the course of marketing and selling its pet foods, however, Nestlé materially omits and does not disclose the likelihood that much of the fish in its pet food is the product of slave labor. Furthermore, Nestlé does not disclose that despite its awareness that slave labor is being used in its supply chains, Nestlé has not required its suppliers to remedy this human tragedy.”

READ ABOUT THE LAWSUIT

Large Pet Food Companies and Sustainable Practices

Mars Petcare is open about their dedication to sustainable practices. In 2010, Mars said they would only purchase fish from fisheries/fish farms that were certified as sustainable by a third party. Mars also said it would no longer use wild caught fish and would rely on fish byproducts or farmed fish. This prevents pet food sources from competing with human food sources. In the United States, Mars receives its fish products from sources approved by the Monterey Bay Aquarium’s Seafood Watch program.

Nestlé Purina produced a report documenting a reduction in energy and water use at several plants. Purina also reports “a traceability program addresses sustainability risk and opportunities and focuses on issues such as deforestation, overfishing, human rights, child labor, water scarcity and animal welfare.”

J.M. Smucker (Big Heart Pet Brands) is reported to regularly review its sustainability initiatives. Vice President of Corporate Communications, Maribeth Burns said, “While we continually review our sustainability initiatives throughout the Company, we have not yet formalized our focus on the pet food industry at this time.”

One challenge in the pet industry is that owners are seeking food for their pets that more closely resembles what humans eat. Global Sustainability Director for Mars Petcare, Isabelle Alvoet said, “We are going to have to educate our consumers. It’s not easy.”

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Nestlé Petcare Half Year Results

Compared to last year Nestlé has had lower revenue growth in the first half of 2015. According to Nestlé, “The results of the first half allow us to reconfirm our outlook for the full year: we aim to achieve organic growth of around 5% with improvements in margins and underlying earnings per share in constant currencies, and capital efficiency.”

• Sales of CHF 42.8 billion (Convert to USD), 4.5% organic growth, 1.7% real internal growth
• Trading operating profit margin 15.0%, up 20 basis points in constant currencies
• Underlying earnings per share up 7.3% in constant currencies

Petcare in North America showed good growth, in spite of the negative impact from the Beneful case. Among the drivers were Fancy Feast cat food, the Pro Plan platform for dog food, and cat litter. Petcare continued to be a growth driver for Latin America and will benefit from new production capacity in Argentina and Mexico.

For Petcare, the half year sales were $5.465 billion CHF with an organic growth of 4.9%. Trading operating profit margins were 21.0% with an increase of 110bps from the first half of 2014.

READ THE 2015 HALF YEAR PRESS RELEASE

Nestlé Purina PetCare Agrees to Purchase Merrick

An agreement has been signed by Merrick Pet Care and Nestlé Purina PetCare regarding the sale of Merrick to Purina. Terms of the sale have not been published. The sale should close within months and will allow Merrick to benefit from Purina’s global resources.

Merrick produces natural and organic dog and cat food and treats. Merrick has no planned changes to management or operations due to the sale and will continue to produce high quality nutritious food. Merrick Founder, Garth Merrick said, “I believe Nestlé Purina is the right company to take what I, along with others, have built to the next level. I’m proud my name will continue to be on the door as we remain committed to making the best food for the best pets ever.”

CEO of Nestlé Purina PetCare, Joe Sivewright said, “The Merrick team has built an extremely strong portfolio of natural and organic pet food and treat brands that are helping millions of pets thrive. We admire Merrick and what the team is doing to provide pets with nutritious, quality and safe food and are excited about how the Merrick brands will broaden the Purina portfolios.”

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Pet Food Experts Ends Relationship with Nestlé Purina

A pet food distribution company in the United States, Pet Food Experts (PFE) is no longer affiliated with Nestlé Purina. Michael Baker of Pet Food Experts states, "this important strategic decision demonstrates our unwavering commitment to our company mission. Helping independent pet retailers win is our sole focus. Being independently owned, we have to be diligent in maximizing our resources, and I’m confident this decision will only make us stronger.”

The two companies had a business relationship that had lasted 10 years. "Nestlé Purina is an extremely professional organization and played an important role in our company’s history over the past decade. We wish them all the best in the future,” pronounces Baker. PFE’s last delivery of Nestlé Purina products will be on May 29th, 2015.

Nestlé Purina has transferred their distribution rights to Phillips Pet Food and Supplies with the first scheduled product delivery on May 18th, 2015. 

READ THE NEWS REPORT HERE

Nestle ad first to pitch at canine customers

Nestle, one of the world’s biggest makers of pet food, said on September 30 the launch of the first television commercial designed especially for dogs, using a high-frequency tone to grab their attention.

“Dogs’ hearing is twice as sharp as humans. They can pick up frequencies which are beyond our range and they are better at differentiating sounds,” said Georg Sanders, a nutrition expert at Nestle Purina PetCare in Germany.

“The television commercial aims to reach both the pet and the owner, supporting the special one-to-one relationship between them,” said Xavier Perez, Brand Manager of Beneful for Europe.

Read more in the Calgary Herald Article.

Nestlé first-quarter sales: continuation of strong momentum

• Sales of CHF 20.3 billion, 6.4% organic growth, 4.9% real internal growth
• Growth in developed markets, double-digit growth in emerging markets
• Market share gains in all three Zones
• Full-year outlook unchanged: organic growth of 5-6% combined with margin increase in constant currencies

Paul Bulcke, Nestlé CEO: “We achieved growth in all categories in the first three months of 2011, maintaining last year’s momentum. We continue to invest for the future, particularly in R&D and consumer-facing marketing, while addressing the challenge of higher input costs by accelerating the pace of innovation as well as ensuring the appropriate balance between savings from Nestlé Continuous Excellence and pricing. In view of the strong start to the year, we are able to reconfirm our guidance for 2011 as a whole.”