Nestle in Advanced Talks With R&R on Ice Cream Joint Venture

  • JV would be established in 2016 and cover Europe, Africa
  • Move could lead to eventual exit, says analyst Schwendimann

Nestle SA, the world’s biggest food company, is in advanced talks with Britain’s R&R Ice Cream Plc to create a joint venture to run most of its ice cream business outside North America, a move that analysts said could presage an eventual exit.

Nestle and R&R would own an equal share in the partnership and operate in 20 countries, the Vevey, Switzerland maker of Nespresso coffee and Cailler chocolate said in a statement Monday. The joint venture, which also includes Nestle’s European frozen food business excluding pizza, would be established in 2016 and feature brands such as Cadbury, Moevenpick and Kelly’s of Cornwall.

For Patrik Schwendimann, an analyst at Zuercher Kantonalbank, the move illustrates Nestle’s plan to revamp its portfolio and focus on faster-growing sectors. Over the past two years Nestle has jettisoned PowerBar snacks, Jenny Craig diet centers, and Juicy Juice drinks. Nestle generates $7.4 billion in ice-cream sales globally, according to data-tracker Euromonitor, yet the gap between it and market leader Unilever has widened since 2010 as Unilever pushes brands like Magnum into new markets.

“This would be seen as an intermediate step towards an exit, in whichever form that would be,” Schwendimann said. “Ice cream has been performing below average for a long time.”

Twenty Acquisitions

North Yorkshire, England-based R&R, formed in 2006 through the merger of the U.K.’s Richmond Foods and German ice cream maker Roncadin, had sales of 838 million pounds ($1.3 billion) last year, according to its annual report. It’s owned by private-equity firm PAI Partners and has made some 20 acquisitions since 1995, including Nestle’s South African and U.K. ice cream units.

Nestle said the joint venture would be composed of senior executives from both companies, with Luis Cantarell becoming its chairman. He is currently head of Europe, Middle East and North Africa and has worked for Nestle since 1976. 

Nestle has a history of forming joint ventures, including a breakfast cereal partnership with General Mills Inc. and an alliance with Coca-Cola Co. to make Nestea drinks in Europe and Canada.

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