Nestlé to acquire Kraft frozen pizza business


Nestlé has agreed to acquire Kraft Foods’ frozen pizza business in the US and Canada for USD 3.7 billion in cash. The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio. This frozen pizza business provides a new strategic pillar to Nestlé’s frozen food portfolio in the US and Canada, where the Company has already established a leadership in prepared dishes and hand-held product categories under the Stouffer’s, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands. No word yet if Nestle will move creative from Kraft’s AOR (Ogilvy NY) to its AOR, McCann-Erickson.

Kraft said it would use the entire proceeds from the deal to improve its bid for Cadbury, the British confectionary which has so far fended off its suitor.

The acquisition brings leadership in the frozen pizza category, where Nestlé only had a minor presence until now, and builds on Nestlé’s existing pizza know-how and operations in Europe. It is a natural fit with Nestlé’s focus on delivering convenient, premium, wholesome and nutritious frozen food for consumers around the world. The transaction is subject to US and Canadian regulatory approval and is expected to be completed in 2010.

Paul Bulcke, CEO of Nestlé, said: “This frozen pizza business greatly enhances Nestlé’s frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery. With total sales of around CHF 3 billion, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category.”

The US is the largest pizza market in the world with consumer sales of about USD 37 billion. With estimated sales of USD 2.1 billion in 2009, Kraft Foods is the leader in the frozen pizza category and has enjoyed double-digit growth in the US and Canada over the last four years. The DiGiorno and California Pizza Kitchen brands have driven the development of the premium segment, providing consumers and families attractive alternatives to eating out and home delivered pizzas. The business also includes other strong brands with Tombstone and Jack’s. In addition, Delissio is the leading frozen pizza brand in Canada.

The business will be part of Nestlé USA. “Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio,” said Brad Alford, Chairman and CEO of Nestlé USA.