Nestlé seems to have signaled a retreat from its ambitious goals, in US chocolate at least. It has recognized that, following its failure to buy Hershey, the chances of getting top two status any time soon are near-zero. Nestlé hopes to build market share organically; while this will be difficult, it stands more chance of achieving it than most of its rivals.

Nestlé CEO Peter Brabeck has stated that it is not possible and not absolutely necessary for the company to be number one or number two in the US chocolate market. Clearly the food giant is still smarting from its failure to grab a piece of Hershey.

Although Nestlé denies putting in a bid for Hershey, it does not deny having an “understanding” with Cadbury over Cadbury’s bid for the US chocolate manufacturer. Catching a piece of the Hershey pie would have been a great move for Nestlé.

Currently Nestlé is in a poor third position in the US chocolate market, some way behind leaders Mars and Hershey. But Nestlé’s aim is to be the number one or two player in each market it operates in. The US chocolate market is not only the largest in the world but it is also growing faster than the US gum and sugar confectionery markets. The US chocolate market is expected to grow at a CAGR of 3.1% compared to 3.0% and 2.2% for gum and sugar confectionery respectively.

Hershey was one of the biggest prizes going, but now there are few other potential targets of that size in view for Nestlé. Nestlé is now turning its – far from meek – ambition to what it has rather vaguely described as ‘nutrition’.

However, Nestlé is hoping Hershey may consider returning its license to sell Kit-Kat in the US, although it realizes that the ball is firmly in Hershey’s court on that one. So what can it do…? It hopes to build market share organically in selected categories. That will be no mean feat in one of the most competitive food markets in the US. Nestlé stands a better chance than most of achieving this aim – but it’s definitely the hard way to get its fingers into more of the American pie.

(c) 2002 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.