As the “double 11” is approaching, Nestle, the world’s largest food company, suddenly announced that it would put a fresh food delivery start-up into its “shopping cart”, with a price of 10 billion yuan.
At the end of last week, Nestle announced the acquisition of freshly, a us fresh food delivery company, for us $950 million (about RMB 6.35 billion), and will pay about US $550 million (about RMB 3.68 billion) of “balance” if the business continues to develop successfully.
This means that nestle will pay a bill of up to 10 billion yuan for the company, which was established only in 2015, under the global epidemic.
Source: freshly official website
Although Nestle has not stopped buying this year, the latest deal is still impressive. In addition to the high total amount of acquisition, fresh food delivery is also a new field for Nestle.
So why did Nestle buy it? What are the implications and potential business opportunities for China’s food industry?
“Fresh food at home”
According to the notice of Nestle, which was read by the snack agent, it was pointed out that nestle had strategically invested in the start-up three years ago, holding 16% of its shares, out of “evaluating and testing the strategic initiatives of emerging markets”. Freshly expects sales to reach $430 million by 2020.
According to the official website of freshly, the company offers 4, 6, 10 and 12 meals a week. Consumers can eat them simply by heating. The price of each meal is between $8.49 and $11.49 (about RMB 57-77). According to reports, the company provides more than 1 million meals a week to consumers in 48 states of the United States.
The company’s main selling points also include less sugar, less processing and rich nutrition and other healthy diet demands, and its food features are fresh food cooked by the chef.
Anyway, freshly thinks he’s worth it.
In an interview with foreign media, freshly’s chief executive and co-founder, Michael wytrach, said the company was profitable at the end of last year. “So far, if we compare our competitors, we’ve spent every cent of the money we raise, which is one of the reasons Nestle likes us.” He said.
Another key point is that, in freshly’s view, it has targeted a sustainable business area with high growth, accurate target consumer groups and consistent with consumption trends in the post epidemic period.
Wytrach told the media last month that “new customers poured in during the outbreak of the new coronavirus”, while orders from existing customers were still 10% higher than before the outbreak of the new coronavirus.
The number of people ordering meals for their elderly parents is also increasing. “There are three types of” super users “: single young people or couples without children in the city; families with children aged 10 or above; and then empty nesters.” Wystrach enumerates.
What’s the attraction of freshly compared with fresh e-commerce such as hello fresh, ordering takeout on grubhub (similar to meituan) and going to Wal Mart and other retail stores to buy frozen food in person?
In this regard, wystrach explained that the above-mentioned services meet the needs of different groups of people, but the reality is that “many people don’t have time to buy semi-finished products and cook in person. Freshly is 30% – 40% cheaper than ordering takeout from restaurants. Although frozen food is cheaper, it can’t provide the flavor that freshly can match the food cooked in restaurants.”.
He also stressed that although the new crown epidemic has brought many consumers back to the kitchen in the short term, the long-term trend is clear. “Every year, people cook less. The fact is, the size of the food market is $1.4 trillion. So we think the market potential is huge. ” He said.
When asked whether the price of food will be too expensive, wystrach admitted that food prices are at a high level at present, but believes that in the future, under the scale effect, the cost is expected to be reduced, “we hope that everyone can afford it in the future.”.
Consumption scenarios
It is not difficult to find that the business model of freshly and the home consumption scene it represents are the most favored by Nestle.
Steve Presley, chairman and CEO of Nestle USA, said in the briefing that consumers are accepting e-commerce and eating at home in an unprecedented way. This is a change brought about by the new crown epidemic, but it will continue for a long time. He also described freshly as an innovative, fast-growing food technology start-up, “the acquisition will accelerate Nestle’s ability to adapt to the new situation in the U.S. food market, and further consolidate Nestle’s position in the future.”.
In addition to opening up a new field of direct customer-oriented delivery channels, there is also a new imagination for the cooperation between freshly and Nestle’s existing businesses.
“We see opportunities to work more closely with Nestle’s purchasing team, equipment team and marketing team, although there are no plans to do so at present, there may be cross business in some areas in the future.” Wystrach said in the interview.
In fact, shortly after the outbreak, Nestle has shown a high degree of concern for home consumption.
Snack generation once introduced that nestle Group CEO Schneider had previously said that the biggest change brought about by the epidemic situation to the food and beverage industry is that consumption changes from off home consumption to home consumption. This is contrary to the previous trend, as people have increasingly consumed food and drink outside the home in recent years.
However, he also stressed that nestle should not shrink the “front line” of consumption business outside the home, but should use its resources to seize new opportunities. He also believed that there are still many opportunities for Nestle to introduce its products and services into the “explosive growth” of new delivery services.
From this perspective, Nestle’s acquisition this time, as Schneider hopes, can help Nestle connect and develop more home consumption scenarios.
Increase the channel of “home” in China
Although this transaction is aimed at the U.S. market, Nestle has also significantly accelerated the layout of “home” consumption scenarios in the Chinese market this year.
Obviously, the reason is that the outbreak of the epidemic has brought great impact on the traditional retail channels, e-commerce and o2o and other “home” modes and channels have taken on the important task of supporting business development.
For example, on September 18, Nestle (China) Co., Ltd. announced that it would deepen its strategic cooperation with dada group, a real-time retail and distribution platform. In addition to building a data-driven real-time retail business model, Jingdong home will also help Nestle tap the sinking market with the help of a network covering more counties, cities and retail leaders in more regions.
It is understood that dada’s Jingdong home has become one of the o2o platforms with the highest sales share of Nestle. Nestle coffee, dairy products, baby nutrition, cereal breakfast, candy Weihua, ice cream and many other brands, as well as many of its subsidiary brands such as Taitaile and xufuji, have reached cooperation with Jingdong home.
Data show that from January to August 2020, Nestle’s dry goods sales increased 127% year on year. During the period from May to August this year, the company’s sales of dry goods increased by 147% compared with the same period of last year; during the dairy festival in March, the sales volume of Nestle dairy products participating in the activities increased by 239% over the same period last year.
Nestle’s three quarterly reports earlier also showed that Nestle China’s e-commerce continued to maintain a strong momentum thanks to the promotion of Nescaf é, Starbucks products and dairy products.
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