Nestle wants bigger piece of high-end chocolate market

Nestle's chief executive, who oversees a sprawling empire stretching from baby food to wrinkle treatment, admits to finding one of its oldest businesses, chocolate, a source of frustration.

Nestle is one of many consumer goods companies trying to tap interest in high-end, natural, artisan, exclusive or organic goods to augment packaged food sales that have been sluggish in Europe and North America since the global recession.

Its Nespresso brand enjoys a comfortable position at the high end of the coffee market, helped by exclusive distribution, break-through technology and ads with George Clooney.

But the company has not done the same in chocolate.

"Premium chocolate is my small intimate frustration," CEO Paul Bulcke told investors at a conference in Boston on Wednesday where he also discussed the company's shrinking appetite for underperforming brands.

His revelation prompted renewed speculation that the company, known for mass-market chocolate, may seek to buy its way into a bigger role in the premium sector, particularly in the US. A Nestle spokesman declined to comment on any plans.

"I think there will be some sort of premium chocolate initiative on a global basis for the company over coming months and quarters," said Kepler Cheuvreux analyst Jon Cox. "And to be honest, about time too."

Nestle sold about 7.5 billion Swiss francs ($8.39 billion) of chocolate in 2013, accounting for about 8 percent of group sales. Its confectionery business is No.3 behind Mondelez International and Mars in a global market with more than $196 billion in retail sales, according to Euromonitor International.

Over the last seven years, Nestle's confectionery business has grown at an average rate of 5.7 percent, below the group average of 6.3 percent, according to Vontobel analysts.

Gourmet chocolate, often made with higher cacao content and exotic flavors such as chilli or ginger, is still a small part of the market and boasts a range of independent players such as La Maison du Chocolat and Vosges.

But multinationals are increasingly present. Korea's Lotte owns Belgium's Guylian, Mars owns Pure Dark and Hershey Co owns Scharffen Berger.

Nestle also sells premium brands - Switzerland's Cailler and Italy's Baci Perugina - but the vast majority of sales come from mainstream brands such as Kit Kat, Aero, and Crunch.

"We're trying to answer that. It's going to be a long-term journey but we do have the quality in chocolate, we do have the knowledge, we do have the 'metier.' We just have to do it," Bulcke said, noting that part of the problem was the company's decentralized structure.