Canadian Packaging

Nestlé To Acquire Kraft Foods' Frozen Pizza Business


January 7, 2010
by Canadian Packaging Staff

Nestlé has agreed to acquire Kraft Foods‘ frozen pizza business in the U.S. and Canada for US$3.7-billion in cash. The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio.

This frozen pizza acquisition brings leadership in the frozen pizza category, where Nestlé only had a minor presence until now in the U.S. and Canada, and builds on Nestlé’s existing pizza know-how and operations in Europe. The transaction is subject to U.S. and Canadian regulatory approval and is expected to be completed in 2010.

Paul Bulcke, chief executive officer of Nestlé, says: "This frozen pizza business greatly enhances Nestlé’s frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery. With total sales of around CHF (Swiss Franc)3-billion, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category."

With estimated sales of US$2.1-billion in 2009, Kraft Foods is the leader in the frozen pizza category and has enjoyed double-digit growth in the U.S. and Canada over the past four years. The DiGiorno and California Pizza Kitchen brands have driven the development of the premium segment, providing consumers and families attractive alternatives to eating out and home delivered pizzas. The business also includes other strong brands with Tombstone and Jack’s. In addition, Delissio is the leading frozen pizza brand in Canada.

The business will be part of Nestlé USA. "Our combined capabilities in direct-store-delivery, R&D (research and development), innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio," said Brad Alford, chairman and Chief executive officer of Nestlé USA.

The business has an estimated 2009 EBITDA (Earnings-Before-Interest-Taxes-Depreciation-Amortization) of US$297-million or 14.2 per cent of sales, and an estimated EBIT of US $279-million. Synergies, estimated at seven per cent of sales, will be fully realized within five years.