Nestlé reportedly looks to Brazil

Unions say Nestlé is expanding in Brazil Keystone

Nestlé, the world's largest food group, may be attempting to acquire Chocolates Garoto, one of Brazil's biggest chocolate brands, according to trade union officials.

When contacted by swissinfo, Nestlé spokesman Francois Perroud said the company has a policy of not commenting on rumours.

“People working close to Garoto’s management have told the union that the company is being sold to Nestlé,” Lara Lucia Lira, a director of Brazil’s Food Workers’ Union, told United States-based news agency Dow Jones Newswires.

An acquisition would create Brazil’s biggest chocolate manufacturer, dwarfing rival Lacta, which is owned by US group Kraft. Analysts estimate a Nestlé deal would be worth $412.2 million (SFr700 million).

Family strife

Garoto has been looking for a buyer because of its increasing debt problems and infighting within the controlling Meyerfreund family about its role within the company.

The family is divided on whether to continue with the group as an independent entity or to sell its stake.

“I believe the sale is largely related to the family dispute and not the company’s debt problems, which aren’t enough to justify such a sale,” said analyst Alexandre Torrano at Itau Bank.

Nestlé’s the biggest

Garoto is Brazil’s last independent chocolate maker. In 2000 it had sales of $187 million.

Garoto, Nestlé and Lacta have market shares of 22.1 per cent, 33.8 per cent and 33.9 per cent, respectively.

The purchase gives Nestlé a dominant position in the Brazilian market and comes at a time when increased chocolate sales are expected over the next few years, according to analysts.

Lira said Nestlé had fended off a rival offer for Garoto from Britain’s Cadbury Schweppes after agreeing to take on labour liabilities.

She added that the union expected massive layoffs in Garoto’s 3,000 strong labour force.

swissinfo with agencies