Nutella Maker Looks to Spread in U.S. Market With Fannie May Deal

By Manuela Mesco Wall Street Dow Jones Newswires

Miniature glasses with hazelnut spread Nutella from Italian food giant Ferrero are seen on a table for a buffet at a restaurant in the village Seeheim near Darmstadt, Germany, March 27, 2016. REUTERS/Kai Pfaffenbach (Copyright Reuters 2016)

Italy's Ferrero International SA has agreed to buy U.S.-based Fannie May Confections Brands for $115 million, as the maker of Nutella and TicTacs tries to strengthen its foothold in the critical North-American chocolate candy market. 

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After years of targeting organic growth, the Italian firm has started to look at acquisition targets, especially when they could help gain critical mass in foreign markets. 

The strategy comes amid attempts toward consolidation within the industry. Last year Hershey Co. rejected an acquisition offer by Oreo maker Mondelez International Inc, a deal that would have created the world's largest candy company. 

For Ferrero -- the No.4 chocolate maker in the world, according to Euromonitor -- future growth must come from outside its core European markets. In 2015 it made its first brand acquisition, snapping U.K. chocolate maker Thorntons PLC. By buying both Thorntons and Fannie May, Ferrero is also trying to focus more on premium products to help differentiate it in a very competitive market such as the U.S., analysts says. 

In 2013 Ferrero set a target of doubling its revenue over a decade. So far its revenue has risen more than 17% since then. 

Currently, two-third of Ferrero's EUR9.5 billion ($10.2 billion) in revenue comes from Europe, boosted by its Nutella spread. But Chief Executive Giovanni Ferrero previously signalled that the U.S. chocolate candy market, of which the Italian firm has just over 2%, was critical to reach that target. 

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Founded in 1920, Fannie May is owned by 1-800-Flowers.com Inc., and now sells mainly through online channels. Ferrero said it will keep the company's plant in Ohio and its distribution centers there and in and Illinois. 

Harry London chocolates, will continue to work as an autonomous brand within the Ferrero group, the Italian company said. Ferrero will also sign a strategic partnership to distribute its own products and Fannie May's through 1-800-Flowers online platform.

The transaction is expected to close by the end of May, Ferrero said.

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