Nestlé to sell Pfizer’s baby food business in Mexico

Swiss food company Nestlé will sell the assets of Pfizer’s baby food business in Mexico to an unrelated third party in order to ensure domestic competition, according to Mexico’s competition watchdog Cofeco.

In April 2012, Nestlé entered into an agreement to acquire Pfizer’s baby food business for $11.85bn as part of its plan strengthen its position in the global nutrition market, and closed the deal in December 2012.

Cofeco, however, rejected the deal in November 2012 stating that it would give the Swiss firm a major share in the infant formula market and wipe out domestic competition.

Cofeco determined that the acquisition of Pfizer’s business would give Nestle about 71% to 88% of baby formula sales volume in Mexico.

In the latest development, Cofeco said that it has accepted Nestlé’s proposal to sell Pfizer’s baby food business in Mexico, in order to ensure that Pfizer’s formula brands remain as an independent and viable competitor in the market.

The assets that will be sold include Pfizer’s formula plant, sales force, operating staff and exclusive brand licences.

As part of the agreement, Nestlé will license Pfizer brands to the buyer of the assets over a period of ten years.

Nestlé will not be allowed to own Pfizer brands for a period of 20 years; however, it can retain the ownership of Pfizer’s Maternal products, which offer multivitamins for women, as they do not compete with any other Nestlé business.

Cofeco said that the sale will be completed soon, subject to its approval.

Mexico is the sixth biggest market for Nestlé, with sales of $2.95bn in 2012, and is fourth-largest infant formula market in the world, after China, the US and Indonesia

Nestlé beat out companies such as Groupe Danone and Mead Johnson to seal the agreement to acquire Pfizer’s baby food business.

The baby food business, which became part of Pfizer following its acquisition of Wyeth in 2009, sells baby formula and maternal supplements and owns formula brands such as SMA Gold, S-26 Gold and Promil Gold.

It generates 70% of its sales from emerging markets and has revenues of $2.1bn with an annual growth rate of 8%.

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Image: The sale of Pfizer’s baby food business in Mexico will ensure that Pfizer’s formula brands remain as an independent competitor in the market. Photo courtesy of Nestlé.