UPDATE 1-Nestle plans to sweeten its UK market share

* Nestle aims to gain share in UK confectionery market

* Looks to gain up to 0.2 percentage points a year

* Sees cocoa prices staying high for 6 to 12 months

(Adds further details from interview)

By David Jones

YORK, England, May 14 (BestGrowthStock) – Nestle (NESN.VX: ), the
world’s biggest food group, plans to grow its market share in
the 4.5 billion pound ($6.6 billion) UK confectionery market
each year despite rivals getting bigger and more competitive.

The KitKat and Aero bar maker aims to gain share although it
faces a new Kraft (KFT.N: ) and Cadbury combination, and hopes to
safeguard 2,000 UK jobs as the industry comes under intense
pressure as its key raw material, cocoa, hits 32-year highs.

Nestle’s head of UK and Ireland confectionery David Rennie
plans to grow his share up to 0.2 percentage points a year from
16 percent although its rivals Kraft and privately owned Mars
have made acquisitions to heap the pressure on the Swiss group.

“We aim to grow the business with steady market share growth
of 10 to 20 basis points each year,” Rennie told Reuters in an
interview on Friday at its York plant in northern England that
churns out one million KitKat bars a day.

Kraft took the lead in the UK market when it swallowed
Cadbury earlier this year, boosting its relatively small 2 to 3
percent share to around 30 percent, while Mars after chewing up
Wrigley in 2008 pushed its market share to 24 percent.

“The two moves have concentrated the players, but not
concentrated the brands. Consumers still have a similar number
of brands to choose from,” Rennie said.

VERY COMPETITIVE

The strengthening of its two bigger rivals with more
marketing muscle and distribution reach along with soaring cocoa
prices have put a microscope on costs, but Rennie does not see
big job cuts like those made in 2006 to remain competitive.

“Cocoa prices are very high and the market is very
competitive but I am not looking to cut jobs to allow myself to
compete,” he said.

Cocoa prices doubling over the last three years to around
2,400 pounds a tonne (LCCN0: ) have put massive pressure on the
business with modest price rises unable to absorb the cost
increase.

The commodity has been pushed higher by tight supplies from
major growing nations like the Ivory Coast, an anticipated
upturn in demand as the world comes out of recession, and
speculative buying.

“Cocoa is at a historic high level and the indications are
that it will stay high for a while, with no big decline
anticipated in the next 6 to 12 months,” Rennie said.

“There is massive pressure on the business and had we not
done massive restructuring 3 to 4 years ago it would have been
very tough,” he added.

Nestle went through big restructuring since acquiring
Rowntree in 1988. Four years ago it cut a third of the staff in
York and now employs about 2,000 confectionery staff across York
and three other sites.

“MAGNIFICENT SEVEN”

Rennie’s focus is on his “magnificent seven” brands —
KitKat, Aero, Smarties, Milky Bar, Quality Street, After Eight
and Rowntree’s — which account for 70 percent of his sales,
largely produced from Nestle’s four northern English plants.

With UK industry volumes largely flat in recent years,
manufacturers have relied on price rises to drive the annual
market in the UK by 2 to 3 percent.

Rennie is looking to KitKat, his fastest-growing brand with
high-single digit percent annual growth, and new innovations to
drive that growth.
Rennie has helped create a multi-million pound brand in 9
months with Randoms, fruit-flavour shapes that are made in a
Nestle Czech factory.

Randoms are now Britain’s No. 2 sugar confectionery brand
after Nestle’s own Fruit Pastilles, outselling Mars’s Starbursts
and Kraft/Cadbury’s Maynards wine gums.

Confectionery is a core Nestle business that makes up 11
percent of sales, and one in which it ranks No. 3 in the world
after Kraft and Mars. The business contains two of its 30
billionaire brands — KitKat and Nestle chocolate — with annual
sales of over 1 billion Swiss francs.

Stock Today

(Reporting by David Jones; Editing by Mark Potter and Quentin
Webb)

UPDATE 1-Nestle plans to sweeten its UK market share