Nestlé enters online prepared meal market

Nestle USNestlé USA announced its acquisition of a minority stake at Freshly, a company that creates healthy prepared meals.

The food company supplies consumers in 28 states with weekly shipments of meals.

As the lead investor in the $77 million round of new funding, Nestle is entering an online prepared meals market that is currently $10 billion in size in the United States and expected to grow at very attractive rates.

As part of the agreement, Nestlé USA’s Food Division president Jeff Hamilton joins Freshly’s board of directors. The recent investment will help to fund Freshly’s construction of a new East Coast kitchen and distribution center in 2018, as it prepares to expand to nationwide service.

“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. Acquiring a position in Freshly not only gives us access to this growth market, but it also brings reciprocal benefits for both companies. Nestlé 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,” Nestlé USA chairman and CEO Paul Grimwood said.

“Freshly is directly aligned with Nestlé’s strategic focus on finding new avenues to deliver delicious, nutritious meals to consumers in a way that fits their busy lives,” added Hamilton. “The company was founded by time-constrained professionals who did not have time to cook, but wanted to eat healthy meals. Two years later, their goal to offer heat-and-serve meals has become a successful business that reflects America’s changing eating habits.”

With a 60,000 sq. ft. facility in Phoenix, Freshly currently can ship to approximately 40 percent of consumers. Upon completion of a new facility in Savage, Maryland, Nestlé estimates that Freshly will be able to serve about 93 percent of the US population with prepared meals that can be heated in two to three minutes.

“We are extremely excited to work with and to learn from Nestlé, the largest food company in the world,” said Freshly CEO Michael Wystrach. “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.”

Freshly’s most popular meals include Sicilian-Style Chicken Parm with Broccoli (with 50g Protein, 510 Calories and 17g Carbs), Steak Peppercorn with Sautéed Carrots and Asparagus (33g Protein, 500 Calories, 30g Carbs) and Roasted Turkey with Quinoa Stuffing (41g Protein, 560 Calories, 33g Carbs). Unlike many other DTC meal companies, Freshly’s subscription-based model offers various meal plans to consumers. The company’s website highlights a rotating menu that includes many gluten-free, paleo, high protein, low carb or veggie-based meals.

“Nestlé has performed in line with its rivals over the years with a CAGR of 3.5% in overall packaged food. The US represent the company’s largest single market, yet frozen in time. Although North America represents 20% of Nestlé’s global sales in packaged food, which makes it its largest single market, it continues to lose share in this important market. Ready meals, ice cream and frozen desserts and baby food in particular are trouble shooters,” Lianne van den Bos, senior food analyst at Euromonitor International commented.

“In ready meals Nestlé has invested significantly to turn sales around of its Lean Cuisine brand, which, according to the company, is showing positive signs of improvement. Its Stouffer’s Fit Kitchen brand also saw a positive performance in 2016. In baby food, Nestlé struggles with its Gerber brand which has not captured the hearts of the nation’s parents who are most concerned with innovation and convenience. As a result, it lost out to brands, such as Ella’s Kitchen, Sprout, Happybaby, Earth’s Best and Plum Organics.”

Nestlé expects to lend its expertise to Freshly in sourcing, food preparation and food safety, packaging and distribution, and advertising and marketing.

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