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CAPE TOWN - Italian luxury chocolate brand, Ferrero, announced plans to acquire Nestle which will make the luxury brand the third largest player in the industry in the US.  

According to Euromonitor, a market research provider, this deal would make Ferrero the third largest player in the chocolate confectionary in the US. According to data on the company shares of chocolate confectionery in the US, Ferrero currently ranks as the fifth largest player who controls just 3% of the industry. 

Meanwhile, the industry is dominated by the Hershey group with 31.5% followed by Mars Inc with 27.1%, Chocoladefabriken Lindt & Sprüngli AG in 9.3% and Nestlé SA with 7.9%. 

Nestle however performed well and in line with its rivals over the years with a 3.5% compound annual growth rate (CAGR), says Euromonitor. 

READ ALSO: Nestle to pay $425 million to buy Blue Bottle Coffee

"Nestlé’s most prominent chocolate confectionery brand in the US, Butterfinger, has suffered in against brands with a more premium positioning including Lindt and against larger players such as Mars. Although private equity companies have shown interest, it is likely that Ferrero would be willing to pay a higher price premium in order to achieve its strategic goal of boosting its presence in the US. A successful transaction would make Ferrero the third largest player in chocolate confectionery in the US. As Hershey recently made a large acquisition outside chocolate confectionery to diversify into other type of snacks, by buying the Skinny Pop popcorn brand, it is also less likely than Ferrero to be willing to engage in a bidding war. However, as Nestlé’s brands are not positioned as premium as Ferrero’s brands, their turnaround and a successful integration into Ferrero’s brand portfolio would be uncertain", says Raphael Moreau, senior food and nutrition analyst at Euromonitor. 

The last acquisition saw the chocolate confectionery offered to buy British chocolate company, Thorntons for R2.2 billion just three years ago in 2015. 

This marked the first move by the maker of Ferrero Rocher pralines, since the death of its founder, Michele Ferrero earlier that year. 

According to reports, shares in Thorntons rose as much as 42.9 % after the announcement. 

At the time, Ferrero already owned 29.9% of Thorntons after buying stakes from top shareholder Crystal Amber and former chairman John von Spreckelsen, as well as part of the holding of Hotchkis & Wiley. 

READ ALSO: Ferrero eyes UK chocolate firm

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