Food and beverage giant Nestlé has acquired the startup prepared meal delivery service Freshly for $950 million. Nestlé first became interested in Freshly in 2017, leading a $77 million funding round in the business, representing around 16% of the company. Nestlé said at the time it planned to evaluate and test the meal subscription market.
Following the acquisition, Nestle estimates a future growth potential of $550 million from the business. Freshly was founded in 2015.
“We are excited to welcome Freshly to the Nestlé family,” said Nestlé USA CEO Steve Presley. “Consumers are embracing e-commerce and eating at home like never before. It’s an evolution brought on by the pandemic but taking hold for the long term. Freshly is an innovative, fast-growing, food-tech startup, and adding them to the portfolio accelerates our ability to capitalize on the new realities in the U.S. food market and further positions Nestlé to win in the future.”
Nestlé is a major supplier to Walmart and Sam’s Club and maintains a sales and marketing office in Northwest Arkansas dedicated to those retail business customers.
Stewart Samuel, an analyst with IGD, said central to Freshly’s ethos is a focus on removing barriers to healthy eating, with its food philosophy centered on less sugar, less processed, and more nutrients. All meals are gluten-free and single-serve for easy portion control. He said the company is shipping more than 1 million meat each week to customers in 28 states. He said Freshly has forecast sales of $430 million this year.
“The deal comes as consumers are eating more meals at home and are embracing delivery services. Retailers and foodservice operators have been innovating to capture the evening meal opportunity in particular, with a focus on ease and convenience. However, this deal marks the first time a major CPG has entered the meal delivery space, suggesting that Nestlé expects these shifts in consumer behavior to outlast the current pandemic,” Samuel said.
Freshly’s weekly subscription service delivers fresh, chef-cooked meals to customers’ doors that can be heated and served in three minutes. And while some analysts have said food subscription services could see declines as more consumers are cooking for themselves given they have more time working from home.
But Freshly competitor Blue Apron reported its meal kit sales doubled through mid-April from a year ago, and there is also more competition as some restaurants also got into the game as the pandemic has continued. Nielsen reports U.S. customers spent around $100 million on meal kits for the month ending April 11, which is up nearly 100% of the sales during the same period in 2019. That included stellar results from HelloFresh who is reporting a 66% growth in sales this year compared to last.
Nestlé USA manufactures and markets iconic brands such as CoffeeMate, Stouffer’s DiGiorno, Haagen-Dazs, Lean Cuisine, Boost, Starbucks Coffee and Toll House
“At Nestlé we know the at-home food market and we know how to win there,” said Laurent Freixe, Nestlé CEO Zone Americas. “With the acquisition of Freshly, we are strengthening our position in the U.S. and expanding our ability to deliver a wide variety of delicious food to our consumers when and where they want. Whether purchasing our products from the comfort of their homes, in retail stores or through social commerce, we will continue to provide them with unbeatable convenience, choice and ease of purchase.”