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The maker of Nutella is about to become the third-largest chocolate company

Nestlé is losing its sweet tooth.
AP Photo/Mark Lennihan
Nestlé is losing its sweet tooth.
By Chase Purdy
Published Last updated This article is more than 2 years old.

Nestlé—the company behind many iconic candy bar brands—is shedding its sugary reputation.

The Swiss company has agreed to sell its US confectionary brands—including Butterfinger, Baby Ruth, Laffy Taffy, and Crunch bars—for $3 billion to Ferrero, the maker of Nutella, making the hazelnut spread producer the globe’s third largest chocolate company.

The deal pushes Nestlé further along its mission to become a high tech health company—where its products operate more like medicine instead of vehicles for sugary delight. Nestlé’s US candy business generated more than $934 million in sales last year.

“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,” said CEO Mark Schneider.

The deal is well-timed for the Swiss behemoth. Global chocolate market growth is expected to continue slowing during the next five years, according to Bloomberg. It also unsaddles the company from a candy unit that has been facing stiff competition in the US from Hershey’s, Mars, and Lindt.

Still, one sweet tooth brand Nestlé will retain is Toll House, a dominant name in grocery store baking aisles. The company says it will also keep its international confectionary brands, prioritizing the growth of KitKat, according to the statement.

Schneider has been CEO of Nestlé for roughly a year. A healthcare industry veteran, his leadership decisions seem in line with those of his predecessors, who looked to drive the massive company into the health sphere. In December, the company spent $2.3 billion to acquire the Canadian-based supplements company Atrium Innovations. That’s just one of many multi-billion dollar deals the company has executed across the last decade to acquire pharmaceutical laboratories.

Analysts say the packaged foods industry has slowed in recent years, meanwhile the market for medical products has grown rapidly. Finding a sweet spot somewhere between the two is an ideal position for the Swiss company—and shedding sugar is a good way to get there.

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