Kraft Selling Off Frozen Pizza Business
to Nestlé in Surprise Move

Kraft Foods has been the biggest name in the frozen pizza business in the United States and Canada for years now, but no more – the company has abruptly agreed to sell its brands to Nestlé S.A. for $3.7 billion in cash.

The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio. Frozen pizza provides a new strategic pillar to Nestlé’s frozen food portfolio in the US and Canada, where it is already a leader in prepared dishes and hand-held product categories under the Stouffer’s, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands.

Nestlé has historically claimed only a minor presence in the North American frozen pizza market, but it can now build on its European pizza know-how and operations. The move fits in with Nestlé’s focus on delivering convenient and nutritious frozen food to consumers around the world. The transaction is subject to US and Canadian regulatory approval and is expected to be completed this year.

“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,” said Paul Bulcke, ceo of Nestlé. “With total sales of around three billion Swiss francs, Nestlé will become the world leader in the frozen pizza category.”

The US is the largest pizza market in the world, with consumer sales of about $37 billion. With estimated revenues of $2.1 billion in 2009, Kraft has enjoyed double-digit growth in the US and Canada over the last four years. The DiGiorno and California Pizza Kitchen brands have driven the development of the premium segment, providing consumers attractive alternatives to eating out and generally pricier home delivered pizzas. Delissio is the leading frozen pizza brand in Canada.

The Kraft business will become part of Nestlé USA. “Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit,” said Brad Alford, chairman and ceo of Nestlé USA.