Selling frozen food across borders, how does Nestle master half of frozen food in the United States step by step?
Text: Corin
Source: foodaily daily food (id:foodaily)
Perhaps few people have paid attention to Nestle, the largest frozen food group in the United States.
In the middle C is Nestle’s four most famous frozen food brands
Image source: https://www.meatpoultry.com/
Yes, some brands are obviously international companies selling milk powder coffee, which actually controls half of the frozen food in the United States. They even have more than 10 frozen food brands for different purposes, and this is just the tip of Nestle’s iceberg as the world’s largest food company. According to the data analysis of Japan, Nestle ranked second in the world with a market share of 2.51% in 2020.
Today, foodaily brings you the story of how Nestle has laid out the U.S. frozen food market step by step in the past 50 years.
Acquisition of Centennial brands
Enter the frozen food market in the United States
When you have become a leader in one field, you keenly smell that the segment industry on the other side of the ocean is very promising. How can you quickly attack and seize market share?
A. Incubate new brands internally, segment tracks and seize the market
B. Cooperate with industry leaders to replace resources and enter the market
C. Look for opportunities to acquire brands, adjust strategies, and gain a firm foothold
Congratulations, friends who choose C. you made the same choice as Nestle. Work hard. Maybe the next industry giant is you (just kidding)!
Since Swanson TV dinner was sold in convenience stores in 1954, frozen food has gradually entered American daily life. Almost 20 years later, as the world’s largest food company, Nestle was gearing up to enter the frozen food market in the United States. Many brands were already fighting hard for market share. From staple vegetables to fried snacks, frozen food companies were making great efforts to innovate menus. After market research, Nestle finally got a great opportunity to enter the market.
The first Swanson dinner was a Thanksgiving turkey dinner with green beans and potatoes. It was very popular after its launch
Image source: http://patentplaques-blog.com/
At that time, Litton industries, once one of the largest enterprise groups in the United States, was experiencing a decline in sales due to the U.S. economic crisis, and could only sell some brands that had little to do with its core business. Six years ago, as the largest manufacturer of microwave ovens, it just bought Stouffer, a frozen food company, in high spirits. It wanted to produce special microwave food for the frozen food market, give play to enterprise synergy, and further expand the market of microwave ovens and frozen food.
Stouffer, which was first acquired by Nestle, mainly makes frozen macaroni and other staple foods
Image source: Nestle official website
Unfortunately, the weather is not perfect. Litton industries can only survive by breaking its tail, but has no choice but to say goodbye to Stouffer. Nestle also just aimed at this opportunity. In 1973, it won the cutting-edge pioneer in the frozen food industry, and since then, it has aggressively advanced into the frozen food market in the United States.
At present, the competition in the frozen food market in the United States is still very fierce, including the old upstream raw material suppliers Cargill and general mills, as well as Nestle’s old rivals kafheinz and ConAgra, as well as multinational brands such as bland element and McCain.
However, Nestle still continues to make efforts in the frozen food market. After all, according to Nestle’s financial report in the first quarter of 2022, Nestle’s frozen food business still has a relatively stable growth under the epidemic.
Despite supply chain constraints, frozen food has achieved positive growth
Image source: Nestle official website
From frozen staple food to frozen pizza
Over the past 50 years, it has gradually enriched its business landscape
Of course, with Stouffer alone, Nestle is difficult to achieve the second position in the world. Today, Nestle has more than 10 frozen food brands. Since entering the U.S. market in 1973, Nestle has won the frozen food segment step by step, from Stouffer, which specializes in lasagna macaroni, to lean cuisines, a low-fat and healthy version launched for market demand in 1981, and then bought the innovative frozen sandwich hot pocket, which is deeply loved by young people in 2002. At this time, two of Nestle’s three major frozen food brands have been firmly held in their hands.
Lean cuisine (left), hot pockets (right)
Image source: Nestle official website
Since the 1990s, with the improvement of technology, the taste of frozen pizza has also been upgraded, and it has become increasingly popular in the United States. However, Nestle has no brands of related categories, and the frozen pizza market in the United States is almost “unlicensed”. It will take time to cultivate new frozen pizza brands. If we can’t catch up with this upsurge, the subsequent market competition will only be more intense, and for Nestle, It’s a pity that such an attractive piece of cake can’t be shared in time. Even if you want to reproduce the method of entering the American market in the past, you need to wait for the right time, place and people.
The turning point occurred in the acquisition of Cadbury, a British candy brand, by Kraft food Inc. in 2009.
Zuiwengyi behind the acquisition
As global confectionery giants, kraft and Nestle have long been fighting for market share in the world market. At the same time, when “fighting alone” is not able to open up the new market situation, the British national brand Cadbury may need the help of industry giants to occupy more market share in the new market more smoothly and quickly. Therefore, many giant companies are ready to achieve a win-win situation through acquisitions.
Kraft took the lead because it was worried that Nestle and Hershey would join hands to compete for Cadbury. Once successful, the two giants were likely to encircle and suppress it, and Kraft’s market position would be under great threat. In September, 2009, kraft made a £ 10.2 billion takeover offer to Cadbury. As soon as this offer was made, the whole UK was in an uproar, and even many people took the initiative to protest on the street, calling on the government to implement economic protectionism policies in the UK, so that British national brands cannot fall into the hands of others.
Cadbury also timely showed its pride, not only high-profile rejected Kraft’s acquisition, but also publicly claimed that the acquisition offer was “ridiculous”. Therefore, kraft launched a formal hostile acquisition of Cadbury valued at 9.8 billion pounds in September 2009.
Image source: http://edition.cnn.com/
At the same time, many analysts also speculate that nestle may consider a joint offer with Hershey, because Hershey and Ferrero have publicly stated that they are considering a bid. Although Paul bulcke, the CEO of Nestle, remained silent when asked whether to participate in the acquisition, the ambiguous attitude still caused considerable pressure on Kraft’s acquisition plan.
In January of the next year, after several rounds of communication, Cadbury finally agreed to Kraft’s £ 11.5 billion acquisition, which was a full £ 1.3 billion higher than when it first proposed the acquisition. Similarly, kraft also made appropriate concessions and sold its profitable frozen pizza business in the United States and several production line factories to Nestle at a price of $3.7 billion in January 2010. Subsequently, Nestle also made it clear that it would not participate in the official offer for Cadbury.
Taking over the frozen pizza Department delivered by its competitors, Nestle finally improved its weakness in the frozen food business. Digiorno, tombstone and Jack’s, which were packaged and sold by Kraft, are all popular frozen pizza brands in the United States. Facts have proved that these brands still bring a lot of revenue to Nestle more than ten years after the end of the acquisition.
Digiorno (left), tombstone (middle), Jack’s (right)
Image source: Nestle official website
After some words, will Kraft, who reluctantly gave up selling the frozen pizza department, have a trace of regret?
After the official acquisition of Cadbury, Kraft has occupied 14.8% of the global candy and chewing gum market, surpassing the previous number one Mars Wrigley with a 0.2% advantage, and easily became the world’s largest candy manufacturer. However, Kraft’s earnings per share decreased by about 33% due to the considerable costs incurred in the acquisition and integration of its UK business.
Shortly after the end of the acquisition, kraft launched a repurchase plan, that is, it can recover those frozen food brands sold at the original price of $3.7 billion, but the difficulty is that it must take out $3.7 billion in cash, which can not be deducted by shares of considerable value, so the repurchase did not succeed.
Later, kraft food was split and restructured, and kraft Henz became responsible for the U.S. food business. In 2016, it established a new brand devour, launched a series of instant foods, and wanted to make a comeback in the U.S. market. At present, according to the data analysis of Japan, kafheinz is still the sixth food group in the world in terms of listed share.
Image source: devour foods official website
Will health and customization be the key words of frozen food?
After acquiring Kraft’s frozen pizza department, Nestle’s frozen food sales have continued to decline for five consecutive years, and there have been continuous doubts about nestle in the market, including the failure of Nestle, which has withdrawn from its frozen food business in Europe, to operate the frozen food business in the United States, and the rationality of Nestle’s continued investment in the frozen food business in the United States.
Even so, Nestle has always been optimistic about the prospects of frozen food, and is still actively exploring the future development direction of the whole industry, and continues to invest in innovation for the industry, including but not limited to buying sweet earth foods, a plant-based frozen food brand, financing fresh, a prefabricated dish brand customized by chefs for fresh delivery, and launching life cuisines, a low-fat and high protein main meal brand.
During the epidemic period, people’s ideas also changed, paying more attention to health and health care, so they prefer to choose fresher and healthier foods. Nestle has also updated the product portfolio of lean cuisines based on this. Its healthy diet will be less than 400 calories and 10 grams of fat, or even less.
Sweet earth foods (left), freshly (middle),
life cuisines (right)
Image source: Nestle official website
At the same time, Nestle is still working on the subdivisions of frozen pizza, and has incubated an innovative brand inside – outsider’s pizza, which specializes in Chicago pizza, enriching the taste of frozen pizza that is not available in the market. In 2021, Nestle also invested $100million in the production line and factory upgrading of frozen pizza and main dishes, and focused more resources on market segments that showed greater potential.
Image source: https://bellecommunication.com/
From this series of actions of Nestle, it is not difficult to see that Nestle has recently focused on health, customization and market segmentation, which are rarely touched by brands in China. Perhaps as people pursue higher and higher health and taste, the domestic prefabricated vegetable market will also pay more attention to these keywords.
The epidemic has not only promoted the domestic market process of prefabricated vegetables, but also played a certain role in promoting the frozen food market in the United States. According to the data of IRI and iddba (International Dairy cooked food baking Association), the sales of frozen food in the United States soared during the epidemic, increasing by 17.4% from November 2019 to November 2020. People’s willingness to buy frozen food has increased significantly, and frozen cooked food is regarded as the first choice for stocking and a convenient way to solve daily meals. Against this background, Nestle’s overall share of frozen food sales has also increased steadily. At the same time, as the frozen food group with the largest sales in the United States, Nestle is still trying to promote the innovation and progress of the industry.
As a representative enterprise entering the market from the C-end, Nestle uses more than “cash ability”. Its planning, dormancy, R & D and innovation can give domestic food brands some ideas and experience. Perhaps Nestle’s current exploration in the frozen food market in the United States is the direction of our future development.
[1] Nestlé invests
$100M to expand operations at frozen foods factory in SC, Fooddive, Jul. 2,
2021
[2] Nestlé reports
three-month sales for 2022, Apr. 21, 2022
[3] Frozen food industry, world market, market size, deallab info, Apr. 19, 2022
[4] Covid-19 two
years on – frozen food seeks boost from cost-of-living crunch, Just-food. com,
Mar. 24, 2022
[5] Nestle Adds to
Life Cuisine Lineup with 10 New Frozen Meals, Refrigeratedfrozenfood. com, Aug
11, 2021
[6] Should Nestle
sell US frozen-food division, Just-food. com, Jun 12, 2019
[7] Case study:
Kraft’s takeover of Cadbury, Financial Times, Jan. 10,2012
[8] Kraft ups offer
for Cadbury as Nestlé pulls out of bidding, Campaignlive. co.uk, Jan 5, 2010
[9] Kraft’s Cadbury
bid leaves Nestlé at the crossroads, Marketingweek. com, Sep. 8, 2009
Cover source: Lean cuisines official website
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