Nestle Elevates Its Profile with Acquisition of Premium Brazilian Chocolate Manufacturer

08 Sep, 2023

Nestle Elevates Its Profile with Acquisition of Premium Brazilian Chocolate Manufacturer

Nestle (NESN.S) has announced its acquisition of a majority stake in Grupo CRM, a prominent Brazilian premium chocolate manufacturer, as part of its strategic move into the luxury confectionery market. The Swiss food group made this announcement on Thursday, signaling its expansion into the high-end chocolate segment.

Grupo CRM currently operates a network of over 1,000 chocolate boutiques across Brazil, offering renowned brands such as Kopenhagen and Brasil Cacau. Nestle also highlighted the growing online presence of Grupo CRM, underscoring the company's adaptability to evolving consumer preferences.

While the financial specifics of the deal were not disclosed by Nestle, it is anticipated to conclude in 2024. Nevertheless, reports from Brazil Journal on Wednesday suggested that Nestle's acquisition could amount to approximately 3 billion reais ($602.78 million), while the local newspaper Valor Economico cited a figure of 4.5 billion reais ($904.18 million).

Renata Moraes Vichi will continue to serve as the CEO of Grupo CRM and retain her position as a minority shareholder within the company, according to Nestle's announcement.

This acquisition aligns with Nestle's overarching strategy to broaden its footprint in the super-premium chocolate segment, an area where it currently has a limited presence, primarily with the Italian brand Baci. During the first half of 2023, Nestle recorded a 10.8% increase in confectionary sales on an organic basis, excluding acquisitions and currency fluctuations. Additionally, the company improved its underlying trading operating profit margin by 70 basis points, reaching 14.5%.

Lindt & Spruengli (LISN.S), a Swiss luxury chocolate manufacturer, has also demonstrated strong performance in the market. In the first half of 2023, Lindt & Spruengli reported a 10.1% increase in sales and a remarkable 38% surge in operating profit.

Laurent Freixe, Nestle's CEO for Latin America, expressed the significance of this acquisition, stating, "This acquisition further broadens and strengthens our confectionery presence in Brazil, enabling us to enter the high-end segment."

Under Grupo CRM's Kopenhagen brand, chocolate bars are sold at 29.90 Brazilian Real ($6.01), while a box of chocolates is priced around 130 reals.

Jon Cox, an analyst at Kepler Cheuvreux, offered insights into the deal, initially perceived as unconventional given Nestle's focus on coffee, petcare, and nutrition businesses. He noted, "Nestlé has a chocolate business in Brazil so it can integrate production, leading to synergies, while the premium chocolate category, as Lindt has shown, is a very, very decent business if you get it right."