Nestle agrees ice cream joint venture with UK's R&R

Wed Apr 27, 2016 5:38am EDT
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By Martinne Geller

LONDON (Reuters) - Nestle (NESN.S: Quote) has struck a deal with Britain's R&R Ice Cream to form a joint venture that will sell ice cream and frozen food in more than 20 countries, its latest attempt to adapt to a changing and more competitive market.

The agreement announced on Wednesday caps months of talks between Nestle and R&R's owner, PAI Partners, first reported by Reuters in October.

The venture follows a portfolio review aimed at improving Nestle's performance, which has been weakened by slowing emerging markets, a change in consumer tastes toward fresher foods, and heightened competition.

The 50/50 joint venture, to be called Froneri, will combine the Nestle and R&R ice cream businesses in Europe, the Middle East, Argentina, Australia, Brazil, the Philippines and South Africa, marrying Nestle's strong brands and presence in convenience stores and ice cream stands with R&R's manufacturing ability and access to traditional retailers.

"The Froneri JV is fully in line with Nestle's strategy to better manage its product portfolio," said Vontobel analyst Jean-Philippe Bertschy, who estimated the deal would lift Nestle's 2017 profit margins by 20-25 basis points.

Bertschy noted Nestle had divested more than 25 business units in the past four years. Rivals Unilever (ULVR.L: Quote) and Procter & Gamble (PG.N: Quote) have also sold underperforming assets as slowing global growth has put more focus on profits.

Luis Cantarell, head of Nestle's Europe, Middle East and Africa business, will chair Froneri's six-person board split between Nestle executives and those named by PAI, a French private equity firm. R&R Chief Executive Ibrahim Najafi will be CEO.

Nestle, which is aiming to become a more health-focused company, will keep its stronger ice cream businesses in Asia and most of the Americas, and its position as the world's second-largest ice cream company, behind Unilever.   Continued...

The Nestle logo is pictured on the company headquarters building in Vevey, Switzerland February 18, 2016. REUTERS/Pierre Albouy