Nestlè invests in US online meal maker

7 years ago - Published in Finance, Fundamental Analysis

Nestle has acquired a minority stake in US online meal-kit service Freshly, the latest investment a packaged food major has made in the category.

The world's largest food maker did not disclose the size of stake it has bought in Freshly but said it was "the lead investor in the $77mln round of new funding" that was announced by Freshly on Monday.

"While most food choices are still made in supermarkets, it's clear that consumers are responding to a growing universe of direct-to-consumer options, made possible through innovation," Paul Grimwood, chairman and CEO of Nestle's business in the US, said. "Acquiring a position in Freshly not only gives us access to this growth market, but it also brings reciprocal benefits for both companies. Nestle will gain visibility into Freshly's advanced analytics and its highly effective distribution network and Freshly will benefit from our R&D, nutrition and sourcing expertise."

The Swiss company said it’s entering the $10 billion online prepared meals market to gain direct access to consumers who don’t have time to cook. 

The deal reflects Nestle’s effort to keep up with changing customer tastes by shifting to healthier foods. The Swiss company said last week it may sell its U.S. chocolate and candy business, which analysts estimate may fetch $1 billion to $3 billion. 

Nestle has spent the past few years revamping its Stouffer’s and Lean Cuisine brands of prepared meals, which it sells via grocery stores.

Freshly, a two-year-old company with 400 employees, makes meals such as Sicilian-style chicken parm with broccoli and roasted turkey with quinoa stuffing, without any artificial flavors, colors or preservatives. 

Nestle said its investment would help New York-headquartered Freshly, set up in 2015, to build a kitchen and distribution centre in Savage in Maryland next year. Freshly, which already has a facility in Phoenix, is eyeing nationwide coverage.

Freshly CEO Michael Wystrach said: "This investment and close partnership will allow Freshly to continue to expand and rapidly scale our reach in order to achieve our goal of being in every household in America."

The company can reach 40 percent of the country’s population and 28 states from its operations center in Phoenix. The East Coast center will increase that to 93 percent, Nestle said.