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Nestle Puts Sluggish Ice-Cream Businesses Into Joint Venture

  • New U.K.-based company to have annual sales of $2.8 billion
  • Movenpick maker has been losing market share to Unilever

Nestle SA is shifting large parts of its global ice-cream business into a joint venture with British frozen-foods specialist R&R Ice Cream to share the costs of a low-margin business whose growth trails the rest of world’s largest food company.

The U.K.-based joint venture will employ about 15,000 people and generate sales of 2.7 billion francs ($2.8 billion), bringing together brands like Nestle’s Movenpick and R&R’s Cadbury and Oreo. Nestle will contribute its ice-cream business outside North America, the companies said in a statement Wednesday, after announcing their intention for the partnership in October. The two sides didn’t disclose financial details of the business, which will be called Froneri and operate in more than 20 countries.

Nestle is looking for a partner in a business where profits are challenged by the logistical expenses of storing and shipping frozen treats. Nestle’s milk and ice cream sales rose 1.7 percent last year, less than half the rate of the whole company, and it’s been losing market share to Magnum-bar maker Unilever. Analysts have said the move could presage an eventual exit from ice cream, an indulgent product that contrasts with Nestle’s expansion into health and wellness products ranging from baby formula to drinks that could delay the onset of Alzheimer’s disease.

‘‘The Froneri JV is fully in line with Nestle’s strategy to better manage its product portfolio,” Jean-Philippe Bertschy, an analyst at Bank Vontobel AG, said in a note.

Founded in 1985 in North Yorkshire, England and now owned by private-equity firm PAI Partners, R&R is the world’s third-biggest ice cream manufacturer, producing branded and private-label treats. It previously acquired Nestle’s ice-cream units in the U.K. and South Africa. PAI said it plans to keep supporting the company.

The 50-50 venture includes Nestle’s European frozen-food business excluding Italy and pizza, plus a chilled dairy business in the Philippines. Froneri will also have operations in the Middle East, Argentina, Australia, Brazil and South Africa.

Nestle veteran Luis Cantarell, who runs the company’s business in Europe, Middle East and North Africa, will be chairman of Froneri, while R&R’s Chief Executive Officer Ibrahim Najafi will be CEO.

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