Nestlé confident its confectionery business could compete with a Cadbury-Kraft combo

Posted by Daniel Palmer on 11th January 2010

Nestle has said its confectionery business has “sufficient size and scale” to allow the company to compete in the sector even if Kraft Foods succeeds in its bid for Cadbury.

Speaking to analysts last week (7 January), CFO Jim Singh said the Kit Kat maker could perform “competitively across the world” in confectionery.

“We have 152 products representing 77 brands, that are either number one or number two in their market,” Singh said. “So, when you look at our business, we believe we have sufficient size and scale in different dimensions of the business that will allow us to continue to compete effectively, regardless of what happens in our industry segment.”

Singh said Nestle’s confectionery sales grew by 8% on an organic basis in 2008 to CHF12.2bn (US$) and, while the Swiss food giant will not bid for Cadbury, he added that the company could look for smaller deals.

“We have also said that we will continue to look for bolt-on acquisitions to reinforce our competitive position in the market. There may be opportunities from time to time but these are always going to be smaller deals and very geographic specific rather than large global brands. We don’t see the need to make any dramatic change in that strategy,” he said.

Singh was talking to analysts as Nestle discussed its deal on Tuesday to buy Kraft’s frozen pizza business. On the same day, the world’s largest food group also ruled out a move for Cadbury.

Singh remained adamant that Nestle will not be making a bid for the UK confectioner. “Anything that involves any one of the parties in the Cadbury situation is of great interest to the UK Takeover Panel,” Singh said.

“We have had a discussion with [the panel] and we have responded to the outcome of the discussions with the board. We have said very clearly that we are not interested or involved in any aspect of a bid for Cadbury.”

23 January is the last date for any rival offer to Kraft’s bid.

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