European food giant Nestlé has steadily expanded its footprint across North America with a succession of important acquisitions in niche sectors as well as the main stream. The first key purchase was Carnation in 1985; more recent deals include local brands Purina petfood, Dreyer's ice cream, Gerber baby food and DiGiorno frozen pizza, each of which has delivered the group a dominant position in a particular sector. However, Nestlé has found it far more difficult to establish a strong US presence for its major European brands such as Maggi or Nescafe, and some products which play an important role in its international profile - breakfast cereals, for example - are not sold at all in America. It has begun to consider scaling down other weaker US segments, such as confectionery, for example. It announced a strategic review of that particular business in 2017, and eventually agreed a sale of the business to Ferrero for $2.8bn.
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|Hot Pockets||Nestlé Good Start|
|Stouffers||Dreyer's Ice Cream|
|Nestlé Tollhouse||Lean Cuisine|
Adbrands Weekly Update 26th Apr 2018: Nestle has launched a review of creative and digital assignments across its large North American portfolio. According to Adweek, it is aiming to consolidate duties with between four and six agencies, rather than the ten or more currently on the roster. This could also pose a threat to WPP. The bulk of creative is split between Interpublic's McCann and FCB, and WPP's JWT and Ogilvy, though a number of other agencies also work on individual brands. WPP also has sole charge of media and production, and these duties are not thought to be affected by the latest review.
Adbrands Weekly Update 18th Jan 2018: As expected, Ferrero secured the deal to acquire Nestle's US confectionery division, comprising a collection of local brands including Butterfinger, Baby Ruth, Raisinets, SweeTarts and Nerds, as well as the license for international brand Nestle Crunch. (The US is the only market in the world where Nestle doesn't own KitKat; the license is held there by Hershey). Price tag was $2.8bn, or a little over three times annual sales. The purchase will catapult Ferrero into third place in US confectionery. The combination of Nestle's brands with Ferrero's existing Kinder and TicTac, and the Ferrara Candy business it acquired last year will give the Italian company around 9% market share, well ahead of Mondelez and Lindt (both around 5%), but still some way behind market leaders Hershey and Mars on 31% and 29% respectively.
Adbrands Weekly Update 11th Jan 2018: The final bids for Nestle's US confectionery business were submitted this week. It looks set to be a contest between US giant Hershey, Italian interloper Ferrero (makers of Kinder, Nutella and Tic Tac) and the private equity fund Rhone Capital. Price tag is estimated at around $2.5bn. Most observers believe family-owned Ferrero has the edge, since it is likely to be more willing to pay top dollar to strengthen what is currently only a modest presence in US confectionery.
Adbrands Weekly Update 15th Sep 2017: Having missed out on a string of major acquisitions initiated by new rival Jacobs Douwe Egberts and its controlling shareholders, Nestle finally took steps to protect its key global coffee franchise with a deal for fast-growing US firm Blue Bottle Coffee. The target company retails a wide variety of premium speciality coffee blends direct to consumers via ecommerce subscription or through a small but expanding chain of retail outets. Blue Bottle is hoping to have 55 stores in the US and Japan by the end of this year. Despite its small size, Nestle is understood to have acquired a 68% shareholding in the business for around $500m. Current management led by CEO Bryan Meehan and founder & chief product officer James Freeman will continue to run the company and control the remaining shares. It will operate as a standalone entity, partnering Nestle's existing Nescafe and Nespresso brands.
Adbrands Weekly Update 24th Aug 2017: Nestle's US bottled water Poland Spring is the target of a class action lawsuit brought by residents of Maine - where the brand originates - and neighbouring states where it is distributed. According to the suit, Poland Spring is not spring water as Nestle claims, but actually common groundwater collected from man-made wells in Maine's "most populous counties", in several cases, these are situated near land fill sites and waste dumps. The suit alleges that Nestle has piped well water into artificial springs to give the appearance of being natural: "If consumers knew where the defendant’s wells were actually located, rather than being misled by defendant’s falsely reassuring labels depicting pristine scenes, and knew the extent to which defendant treated or purified the water, they would not buy, or would not pay premium prices for, Poland Spring Water products." Nestle denies the allegations.
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Free for all users | see full profile for current activities: Nestlé opened its first facility in the US in 1900 to make powdered milk. During the 1930s the company began to extend its influence into other areas, launching the Nestlé Crunch chocolate bar in 1938, and Nestlé Tollhouse baking products a year later. Extending the technology it had developed in the coffee market, it introduced its first Nestea powdered tea in 1948, along with Nesquik chocolate powder (originally marketed as Nestlé Quik). During the 1970s and 1980s the company expanded rapidly through a string of acquisitions, starting with Stouffer's. Founded by the Stouffer family in the 1920s as a coffee-shop, the business later expanded to a chain of restaurants. When customers began asking for take-out orders in the 1950s, the family had the idea of freezing its most popular dishes for convenient home preparation, and Stouffer's had became a substantial brand by the time it was acquired by Nestlé in 1973. Nestlé's most significant add-on was the Carnation Company in 1985, which added Friskies petfood and the Libby's brand to the portfolio along with Carnation and Coffee-mate.
Also that year the group acquired Hills Brothers and MJB ground coffees in an unsuccessful bid to break the stranglehold of Folgers and Maxwell House on the US coffee market. (The brands were later sold to Sara Lee). Wonka sugar confectionery joined the portfolio in 1988 through the acquisition of Sunmark; Baby Ruth and Butterfinger in 1990, from Nabisco; sports nutrition product Powerbar in 2000. Also in 2000, Nestlé made its biggest acquisition to-date with the capture of Ralston Purina for $10.3bn, followed by the $2.6bn acquisition of Chef America, marketer of frozen "stuffed sandwiches" under the Hot Pockets, Lean Pockets and Croissant Pockets brand names (combined sales of around $930m in 2013); and the reverse takeover of Dreyer's in 2003. Although it has grown substantially in recent years, Nestlé has also taken the opportunity to divest some of its less profitable products, such as Peter's chocolate, Ortega Mexican foods and the Crosse & Blackwell preserves range. Wonderball, a confectionery product loosely based on Ferrero's Kinder Surprise eggs and launched in 2002, also proved unsuccessful and was later sold. See full profile for current activities
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