Nestle wants bigger piece of high-end chocolate

Reuters/Zurich/London

Nestle’s chief executive, who oversees a sprawling empire stretching from baby food to wrinkle treatment, admits to finding one of its oldest businesses, chocolate, a source of frustration.

Nestle is one of many consumer goods companies trying to tap interest in high-end, natural, artisan, exclusive or organic goods to augment packaged food sales that have been sluggish in Europe and North America since the global recession.

Its Nespresso brand enjoys a comfortable position at the high end of the coffee market, helped by exclusive distribution, break-through technology and ads with George Clooney. But the company has not done the same in chocolate.

“Premium chocolate is my small intimate frustration,” Chief Executive Paul Bulcke told investors at a conference in Boston on June 4 where he also discussed the company’s shrinking appetite for underperforming brands.

His revelation prompted renewed speculation the company, known for mass-market chocolate, may seek to buy its way into a bigger role in the premium sector, particularly in the US. A Nestle spokesman declined to comment on any plans.

“I think there will be some sort of premium chocolate initiative on a global basis for the company over coming months and quarters,” said Kepler Cheuvreux analyst Jon Cox. “And to be honest, about time too.”

Nestle sold about 7.5bn Swiss francs ($8.39bn) of chocolate in 2013, accounting for about 8% of group sales. Its confectionery business is No. 3 behind Mondelez International and Mars in a global market with more than $196bn in retail sales, according to Euromonitor International.

Over the last seven years, Nestle’s confectionery business has grown at an average rate of 5.7%, below the group average of 6.3%, according to Vontobel analysts.