Nestle S.a. (PC) (USOTC:NSRGY)
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2 Months : From Nov 2019 to Jan 2020
By Saabira Chaudhuri
Nestlé SA has agreed to sell its U.S. ice cream arm to a joint venture it has with private-equity firm PAI Partners for $4 billion, a deal the Häagen-Dazs maker hopes will reinvigorate the struggling business.
The sale, which also includes the Dreyer's and Drumstick brands, follows a similar move in Europe and comes amid fierce competition in the world's largest ice cream market.
Nestlé has been working to improve profit margins at the division but has seen its U.S. market share decline in recent years, dropping to 15% last year from 19.3% in 2010, according to Euromonitor. The Swiss company, which focuses on premium ice cream, has faced intense competition in that segment from market leader Unilever PLC as well as upstart brands like Halo Top.
In selling its U.S. ice cream operations -- the country's second largest with sales of $1.8 billion last year -- Nestle hopes to replicate a move it says has been successful in Europe.
The packaged-food giant in 2016 merged its European ice-cream business with PAI-owned R&R Group, which makes brands like Cadbury Flake Cones and Rowntree's Fruit Pastille lollies, to create Froneri.
That business has since expanded, logging sales of 2.9 billion Swiss francs ($2.95 billion) last year, and Nestlé on Wednesday said it was convinced the success of that model could be extended to the U.S.
Ice cream, while high-growth compared with many other packaged-foods categories, has increasingly looked like an oddity at Nestlé. The company says it wants to focus on healthy, nutritious food and has been cutting salt and sugar in many of its products.
Nestlé has also recently been sharpening its focus, selling businesses including U.S. confectionery, and putting greater emphasis on a handful of businesses like bottled water, coffee and pet food.
Nestlé and Unilever -- which owns Magnum, Ben & Jerry's and Talenti -- have both been working on ways to make their ice cream business less open to seasonal vagaries, through marketing, delivery and convenience.
Americans eat more ice cream per capita than any other people in the world, with most bought in supermarkets for consumption at home, leaving the category open to intense discounting.
In contrast to Nestlé's declining market share, Unilever has grown its U.S. share to 20.9% last year from 17.9% in 2010, according to Euromonitor. In the face of tough competition, the world's largest ice cream maker has launched its own high-protein, low-sugar line under the Breyer's brand to counter Halo Top. It also last year rolled out Culture Republick in the U.S., a low-calorie ice cream brand containing probiotics in flavors like turmeric chai and cinnamon, and milk and honey.
Nestlé said the sale of its U.S. ice cream business was expected to close in the first quarter of next year and that it would continue to manage its remaining ice cream operations in Canada, Latin America and Asia as part of its current market structure.
Write to Saabira Chaudhuri at firstname.lastname@example.org
(END) Dow Jones Newswires
December 11, 2019 14:28 ET (19:28 GMT)
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