Nestle strikes joint venture deal with Yorkshire ice cream producer R&R

Food company Nestle has struck a deal with Yorkshire-based R&R Ice Cream to form a joint venture that will see it sell ice cream and frozen food in over 20 countries

Ibrahim Najafi CEO of R&R Ice Cream

Its the latest attempt by the food giant to adapt to a changing, more competitive packaged food market.

The agreement caps months of talks between Nestle and R&R’s owner, PAI Partners.

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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 agility and footprint at traditional retailers.

Luis Cantarell, head of Nestle’s Europe, Middle East and Africa business, said: “We are doing this in order to reinforce our positions to compete in a marketplace in a revolution in retail.

“They have better capabilities (at retail) and we see an opportunity of a more holistic approach.”

Mr Cantarell will be chairman of a six-person board of directors that will be split between Nestle executives and those named by PAI, the French private equity firm.

Ibrahim Najafi, chief executive of R&R, will be the CEO of Froneri.

Even though Nestle has a stated goal of becoming a more health-focussed company, it 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.

Financial terms were not disclosed, but the venture will be a close number three player, with annual sales of £1.9bn and 15,000 employees.

Froneri will be based in the United Kingdom, where it plans to eventually list on the London Stock Exchange.

Frederic Stevenin, partner at PAI. said: “Long term, the objective will be to list the entity as we believe this will be quite an attractive growth story. We think it’s a natural outcome.”

Aside from the ice cream businesses of Nestle and R&R, which makes Cadbury Flake Cones and other frozen treats, Froneri will include Nestle’s European frozen food business, excluding pizza and retail frozen food in Italy, and its chilled dairy business in the Philippines.

The executives declined to comment on the possibility of job cuts, saying the initial focus would be on growing sales, such as by filling gaps in the respective distribution networks.

“The strengths will come from innovation and from pushing growth because we believe there is a fantastic potential in a lot of countries where we could develop new propositions,” Mr Cantarell said.

He added: “Then time will tell how the company will work.”

Following integration, the company would also be open to mergers and acquisitions, he said.

“We will look at all possibilities.”

Nestle has other joint ventures, with US cereal maker General Mills and one with French dairy firm Lactalis.

The deal is expected to close around the end of the year, subject to employee consultations and regulatory approval.

Nestle was advised by Credit Suisse, while PAI was advised by Rothschild.