Nestlé Confectionery (UK)

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Nestlé is the world's #3 confectionery company (after Mondelez and Mars). The core of the business was formed from the acquisition of UK-based confectioner Rowntree Mackintosh in 1988. Although Nestlé already owned a small selection of mainly continental European chocolate brands, Rowntree Mackintosh added products such as Kit Kat, Smarties and Aero with a global following. The merged business was known in the UK as Nestlé Rowntree until 2008. The group now manages a sizeable portfolio of well-known brands, but the biggest by far is Kit Kat, still one of the top selling confectionery products in the UK as well as several other global markets. The brand received a sizeable additional boost in 1999 from the launch of Kit Kat Chunky. During the early 2000s, though, performance stalled. Senior UK management was overhauled in late 2003 in order to refocus the business, and then again in 2005 when that revamp failed to deliver results. More recently, the company's two main rivals have also expanded dramatically as a result of acquisition, further widening their lead over Nestlé both globally and in the UK.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 8th Oct 2015: Nestle relaunched its Cailler brand as a super-premium bar and boxed chocolate range in direct competition with Lindt and its US subsidiary Ghiradelli. Cailler traces its heritage to the original invention of milk chocolate. Before it was acquired by Nestle in the 1920s, Cailler had itself merged with the company founded by Daniel Peter, who 50 years earlier was the first person to successfully blend milk and bitter chocolate for commercial sale. In a completely modern twist, however, the main global sales channel for the relaunched Cailler chocolate will not be bricks and mortar retail but Amazon, which has already begun marketing the products in the US and Europe. It will also be available through travel retail outlets.

 

 

 

 


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Background

Free for all users | see full profile for current activities: The Rowntree company began as a small grocery shop, originally founded in the British city of York in 1725 by devout Quaker Mary Tuke. By the end of the century the shop had begun to sell cocoa, and in 1862 Henry Isaac Rowntree, also a Quaker, bought the cocoa side of the business, establishing a factory to import the necessary ingredients. His brother Joseph became a partner in 1869, eventually taking control of the business after Henry's death in 1883. By then however, the business had diversified into the manufacture of fruit candy, previously a specialty imported from France. In 1881 the company introduced the first British Fruit Pastilles, which proved to be a huge success, followed by Fruit Gums in 1893. As a result of the success of these, and the company's Elect Cocoa, introduced in 1887, Rowntree & Co commissioned a new factory just outside York, which remains the HQ of the current business. Walnut Whip was launched in 1910 (and is today the company's oldest chocolate brand).

A devout Quaker, Joseph Rowntree was also a benevolent employer, introducing many benefits for his factory workers. These included schoolrooms, a gymnasium and a company doctor and dentist. In 1904 he transferred a substantial part of his new wealth into three charitable trusts, which continue to this day to provide housing and other social benefits for the poor. He died in 1925, succeeded as chairman by his son Seebohm Rowntree. 

By this time Nestlé was also active in the UK. The Swiss-based company had opened its first British sales office in 1868. The Anglo-Swiss Condensed Milk Company, later to merge with Nestlé, set up in Britain in 1872, and Nestlé opened its own factory in the UK in 1901. Chocolate played only a small part in the company's business, however. Milky Bar was its main confectionery brand, introduced in 1936 (although the Milky Bar Kid of television commercials didn't arrive until 1961).

Meanwhile the 1930s proved to be a golden age for Rowntree, as the company introduced a series of enormously popular new brands. The company launched the popular concept of gift chocolates with the Black Magic boxed selection, introduced in 1933, followed by Dairy Box in 1936. Aero was another successful launch in 1935, but was overshadowed by what was to become the company's biggest brand, introduced the same year. It was launched as Rowntree's Chocolate Crisp, but became Kit Kat in 1937.

In the late 1930s, Rowntree developed a process for coating milk chocolate with layers of hard candy, and they launched the product as Chocolate Beans in 1937. They were renamed Smarties a year later, and repackaged in tubes. Forrest Mars, later to become the head of Mars Inc, had launched his own confectionery business in the UK before World War II and he swapped technologies with Rowntree. He acquired rights to the hard-coating process for the US market, where he later launched M&Ms; in return he granted Rowntree rights to Mars US's successful Snickers bar. It was launched successfully in the UK as Marathon in 1947. (Rights lapsed after the subsequent takeover by Nestlé, and Marathon was discontinued in 1988). Another successful launch was Polo ("The Peppermint Ring made Wholly by Rowntree"), introduced in 1948. In the early 1960s, the company introduced the concept of after dinner mints to the UK, launch After Eight in 1962.

In 1969, Rowntree & Co merged with rival confectionery business John Mackintosh & Sons to become Rowntree Mackintosh. This business had started up a little way down the road from Rowntree in Halifax. John Mackintosh and his wife Violet, owners of a pastry shop, had developed the first modern toffee in 1890, blending traditional English hard toffee with American-style caramel. The product was sold in its own right as Mackintosh's Celebrated Toffee, and the family established a factory in the US as well as England to manufacture it. The business moved into chocolate in 1912, becoming an increasingly formidable competitor to Rowntree. Following the success of the latter's Black Magic, Mackintosh introduced Quality Street in 1936 (inspired by a play by JM Barrie, author of Peter Pan - the Victorian characters on the box are derived from the play), followed by Rolo in 1937. After World War II, new launches included Munchies (in 1957), Caramac (1959) and Toffee Crisp (1963). In 1969, Mackintosh acquired sugar confectionery business Fox's Glacier Mints, before merging with Rowntree at the end of the year.

Other brands followed though few were to have the same appeal as these core brands, with the possible exception of Yorkie, launched in 1976, and named after Rowntree's home town of York. However by this time Rowntree Mackintosh had grown to become one of Britain's biggest companies. By the 1980s, Nestlé was keen to expand its confectionery business worldwide, following its introduction of its own new brands including Crunch (1965) and Lion Bar (1976). In 1987, it approached Rowntree, offering to take a minority stake in return for marketing its brands in Europe. The offer was rejected; however a few months later Nestlé's rival Suchard quietly acquired 15% of Rowntree's stock in what appeared to be the preparation of a hostile bid. Nestlé quickly launched its own hostile bid, offering £2.5bn for the British business. Rowntree asked the UK government to block both bids, but to no avail. As a result the company was forced to choose between Nestlé and Suchard. Nestlé swung the deal by offering to leave all strategic decisions regarding the company's products with Rowntree's York HQ. The acquisition was completed in 1988. Rowntree Mackintosh's cocoa and jelly brands were moved to Nestlé's UK foods divisions, while Milky Bar and other chocolates were added to the Rowntree portfolio. The acquisition effectively doubled Nestlé's worldwide confectionery business, and many of the Rowntree Mackintosh brands were subsequently introduced overseas. 

Having grown dramatically during the late 1990s and early 2000s, Nestlé Rowntree seemed to hit a brick wall in 2002 and 2003, when virtually all the company's main brands suffered significant falls in sales. This was followed by a change a management in late 2003. Shortly afterwards, incoming managing director Chris White even went as far as to tell Marketing magazine "Nestlé Rowntree is a business in crisis. The past couple of years has been tough and the advertising hasn't delivered". (White later claimed that quote had been taken out of context). White acknowledged that the company's market share had slipped from 21% in 2000 to under 18%, slipping into 3rd place behind Mars. He radically overhauled the group's marketing, introducing a string of product variants including several limited edition variants of Kit Kat and spin-offs of Smarties, Aero and other products. Among other moves, Kit Kat's long-running "Take a break" slogan was dropped. In 2005, Nestlé shook up British consumers when it announced that it was to alter the iconic packaging of its Smarties chocolate beans. Instead of the familiar tube and coloured plastic stopper, Smarties were repackaged in a hexagonal box with a cardboard flip-top. However, while sales of Kit Kat responded with a modest increase, overall market share declined further while profits were rumoured to have fallen dramatically. White left the company in November 2005.

In 2006, the group restructured its confectionery manufacturing business at York, closing part of the 142-acre site, and shifting production of some brands - notably Smarties - to Germany and others (including Terry's Chocolate orange) to Poland. See full profile for current activities


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