Nestlé’s $4 billion sale of its U.S. ice cream business, which includes the Häagen-Dazs and Drumstick brands, to Froneri—a joint venture with private-equity firm PAI Partners—has raised questions among investors about whether the Swiss-based food group will cash out of ice cream altogether.
The back story. Mark Schneider, Nestlé chief executive, has been restructuring the group’s portfolio as consumer tastes shift toward healthy and convenient products and the growth of some of its more traditional lines slows. The ice cream business’s U.S. market share has declined in recent years, falling to 15% in 2018 from 19.3% in 2010 according to Euromonitor, as smaller independent brands have emerged.
The company has already sold its U.S. candy business to Nutella owner Fererro Group and is now shopping its Herta cold cuts and meat-based products unit. Froneri was created in 2016 when Nestlé merged its European ice cream business in 20 countries with Cadbury Flake Cones maker R&R, a unit of French buyout group PAI Partners.
What's new. Froneri will now own the Häagen-Dazs brand in the U.S., which is expected to add $1.8 billion in annual sales. It will allow the joint venture to expand its presence in the U.S., as it looks to grow its global footprint and compete with Unilever, its largest rival. Investors will be watching closely to see if Froneri tries to acquire the non-U.S. rights to the brand, which are currently owned by Yoplait yogurt maker General Mills.
Looking Ahead. Nestlé still runs its ice cream businesses in Canada, Latin America and Asia, but the product is looking out of place in its freezer. Consumers have been losing their taste for milk as plant-based and lactose-free dairy alternatives grow in popularity. That was demonstrated last month when Dean Foods, the biggest milk company in the U.S., filed for bankruptcy protection.
Like its peers, Nestlé is also under pressure to be more environmentally responsible—selling consumers sugary and fatty foods like ice cream doesn’t exactly help its image. This could be a good first step to completely removing ice cream from its freezer.
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December 12, 2019 at 07:55PM
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Nestlé Has Sold its U.S. Ice Cream Business for $4 Billion. Will it Now Empty the Freezer? - Barron's
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