Tuesday 26 Sep 2023
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ZURICH (Sept 7): Nestlé is buying a majority stake in Brazilian premium chocolate maker Grupo CRM, the Swiss food group said on Thursday, as it seeks to expand into luxury confectionary.

Grupo CRM operates a direct-to-consumer model, with more than 1,000 chocolate boutiques under the Kopenhagen and Brasil Cacau brands and a strong, growing online presence, Nestlé said.

Nestlé, which is buying the stake from private equity company Advent International, declined to give financial details of the deal, which is expected to close in 2024.

Website Brazil Journal on Wednesday reported that Nestlé would pay about three billion reais (US$602.78 million or RM2.82 billion) for the company, while local newspaper Valor Economico reported the figure at 4.5 billion reais.

Nestlé said Renata Moraes Vichi would continue to lead Grupo CRM's operations as its chief executive officer, and remain as a minority shareholder.

The acquisition is part of a strategy by Nestlé — the producer of brands such as KitKat, Aero and Smarties — to expand its presence in the super-premium chocolate segment, where it has a limited offering that includes Italian brand Baci.

During the first six months of 2023, Nestlé's confectionary sales increased by 10.8% on an organic basis, which excludes acquisitions and currency movements.

The business has also improved its underlying trading operating profit margin by 70 basis points to 14.5%.

Swiss luxury chocolate maker Lindt & Spruengli has also been doing well recently, increasing its sales by 10.1% in the first half of 2023, while operating profit jumped 38%.

"This acquisition further broadens and strengthens our confectionery presence in Brazil, enabling us to enter the high-end segment," said Laurent Freixe, Nestlé's CEO for Latin America.

Chocolate bars under the CRM's Kopenhagen brand sell for 29.90 Brazilian reais, while a box of chocolates retails for around 130 reais.

Jon Cox, an analyst at Kepler Cheuvreux, said the deal seemed unusual at first glance given Nestlé's focus on its coffee, petcare and nutrition businesses, but made sense.

"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," he said.

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