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Nestle-Rowntree (A+B) Case Solution

Solution Id Length Case Author Case Publisher
1069 766 Words (3 Pages) J. Peter Killing IMD : IMD014
This solution includes: A Word File A Word File

The case relates to the disagreement between the management of two major competitors in confectionery industry – namely, Nestle and Rowntree – over the acquisition bid by Nestle of Rowntree’s operations. The case is based in the year 1988 when the two competitors are engaged in close competition for gaining share of the milk chocolate market. In 1988, Nestlé was the largest food company in the world and has been growing its milk chocolate category in consumer markets. On the other hand, Rowntree was the fourth largest chocolate manufacturer in the world with a share of 7 percent of the world market.

Following questions are answered in this case study solution

  1. Problem Statement

  2. Analysis

  3. Alternatives

  4. Conclusion & Recommendation

Case Analysis for Nestle-Rowntree (A+B)

1. Problem Statement

Rowntree was an English-based confectionery business while Nestle is a foreign business of Swiss origin trying to gain a share of the English confectionery market. Rowntree had created and grown major brands like Kit Kat, Smarties and Aero. Nestle believed it could create synergies by acquiring these brands and leveraging their equity with its strengths in distribution and merchandising. 

2. Analysis

Nestle has been interested in the acquisition of Rowntree for a long period however Rowntree’s management would aggressively thwart any attempt of takeover of the company. Nestlé had never undertaken a hostile takeover before and didn’t intend to engage in a take over of the operations of the company against the will of its management and employees. However, Nestlé was worried about the potential of Rowntree falling into the hands of one of its main competitors Suchard. Nestle owns 14% of Rowntree’s shares while Suchard owned 30% of the shares.

It must be pointed out that the acquisition deal must not be perceived as eliminating competition from the British market rather the acquisition deal should take place if marketing, branding and distribution synergies are to be gained through mergers of the operations of the two companies. Further, it is important to note that Rowntree’s management has been wary of the acquisition attempts of its operations.   

In 1969, Rowntree board had rejected a takeover bid of £37 million from General Foods. The company has already gained a significant size of operations through acquisition deals. In 1969, Rowntree had entered into a long-term agreement with Hershey to produce licensed products in the United States.

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