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Hershey is apparently in talks to sell a 25% stake to Nestle, with the option to buy the other 75% within two years.

Not exactly a surprise, given the company's history in the past couple years: weak new brand extensions that wither and disappear from shelves, moving production to Mexico, contracting with Callebaut, and poor performance overseas. And rising commodity prices are a difficult reality. But will it be the same Hershey's if it falls into the pocket of the giant Nestle?

Tags: Hershey, Nestle, business

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But - what does all this mean for Scharffen Berger, Dagoba, and Joseph Schmidt? Nestle is not known for high-end chocolate brands. The highest of the high are Cailler and Perugina Baci (kisses).

On a separate note and lost in this announcement is the news that Hershey has started replacing cocoa butter with cheaper vegetable oils in some of its products.

There has been a lot written in the blogosphere on this one - here are a few:

CandyBlog (by TheChocolateLife member cybele.
Serious Eats: here (be me) and here.
Thanks for the link Clay.

I've been following Hershey's views on "pure chocolate" for at least four years. (Most especially last year during the FDA review of the proposed changes for the Standards of Identity.) I've been documenting Hershey's more recent product changes (starting with the post I did on Kissables back in early August which was picked up by Bloomberg & before the Today Show piece) but it's been going on for at least the last five years.

I know they're not the "best" chocolate out there but they're consumed by millions of people every day. And I really don't want anyone messing with my Reese's Peanut Butter Cups.

I think the Nestle alliance would be a huge mistake, though the two companies would be sympatico. They both have very low end chocolate and aren't afraid of mockolate products - Nestle has a worldwide presence and a very diversified portfolio of edibles while Hershey's has an extremely strong brand in North America with good placement on shelves.

My feeling for years has been that the Hershey Trust should buy back the company. They currently hold 30% or so of the shares. They could make it a priority for the next 5 years to just buy back most of the outstanding shares. Then go back to the initial mission of Milton Hershey: provide a quality product and support a community through pride in their production.

But if they had to form an alliance or merge with someone, I'd prefer Cadbury. They have similar alternate brands (Green & Black's) and a similar mythology (Cadbury was Quaker, Hershey was Mennonite - both communities were founded with paternalistic Utopian ideals).
Pierre Marcolini could help Nestle with the their new "high-end chocolate brands".

A partnership between Nestle and Pierre Marcolini was announced December last year:

". . . The partnership will allow Nestle to benefit from the know-how and artistic talent of one of the world's leading luxury chocolate makers . . ."

Link to press release!
This is the complete text of the press release:

Nestlé enters into strategic partnership with Belgian luxury chocolate maker Pierre Marcolini

Vevey, Switzerland, December 13, 2007

Nestlé today announced a strategic partnership with Brussels-based luxury chocolate maker Pierre Marcolini. The partnership will allow Nestlé to benefit from the know-how and artistic talent of one of the world's leading luxury chocolate makers, while Pierre Marcolini will gain access to Nestlé's global experience. Pierre Marcolini will provide inspiration for future Nestlé chocolate ranges, while Nestlé will help Pierre Marcolini expand his network of boutiques across the world. Pierre Marcolini will continue to lead his company as an independent and autonomous operation, and Nestlé will join its board. The parties have agreed not to reveal the financial details of the new partnership.

The move further underlines Nestlé's commitment to the premium and luxury chocolate market. Nestlé is strong in the premium chocolate segment with brands such as Perugina, Baci, Nestlé Noir and Cailler. Nestlé is also the world's largest buyer of fine cocoa beans with local operations in key countries such as Ecuador and Venezuela, which account for over half of the world's production of fine beans.

Venezuela and Ecuador may account for more than half the world's production of fine flavor cocoa beans but the press release does not state the Nestlé actually uses those beans in any of its chocolates. In fact, none of the products mentioned above, with the possible exception of one or two of the Cailler bars meets the definition for "Premium" chocolate that the US industry uses, which is chocolate that retails for more than $15/lb.

It will be interesting to see what the partnership ends up delivering. The average consumer doesn't know (and doesn't care) who Pierre Marcolini is. Still, they probably can't do a worse job than Hershey has done.
Never knew the world of chocolate could be so politically and financially predetermined. I understand the business aspect of the industry, but I don't understand if these manuvers will affect the ultimate processing of the chocolate. I'm just a chocolate lover, but in my opinion, the difference in taste and texture is vast.


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