Nestlé S.A. (NSRGY) is the largest food and beverage company in the world, with more than 2,000 brands sold in close to 190 countries. The Swiss multinational began as a producer of infant food in 1867. In 1905, the company merged with the Anglo-Swiss Milk Co. to become Nestlé Group. Nestlé survived World War I, and its products were a staple for U.S. servicemen in Europe during World War II. Since World War II, Nestlé has mounted an aggressive expansion strategy by making a long string of major acquisitions, helping it to expand and strengthen its product portfolio. Nestlé's total sales in 2019 were roughly $97 billion (CHF 92.6 billion). As of June 9, 2020, the company has a market cap of approximately $315.5 billion.
Nestlé's major strategic deals over the past 5 decades include producers of vitamins, baby food, pet food, frozen food -- and even a giant licensing agreement with Starbucks that dwarfs the size of many of its takeovers. More recently, the company has made no secret of its desire to expand into healthier foods as obesity becomes a bigger problem. Nestlé highlighted this new focus when it announced in 2018 the sale of its U.S. candy business to Ferrero SpA, one of the world's largest chocolate and confectionary companies. Nestlé also has expressed interest in making acquisitions in organic products, which are increasingly popular with consumers concerned about the environment and their health.
Below, we'll explore five of the most significant acquisitions in the company's history. Nestlé does not provide a breakdown of the profits and sales that these acquisitions contribute to the company.
Starbucks Corp. Licensing Deal
- Type of business: Coffee
- Licensing price: $7.2 billion
- Date of purchase: Aug. 28, 2018
One of the most important deals in Nestlé's history is not an acquisition, but rather a licensing agreement. We include it in this story because it constitutes one of the largest—and potentially most lucrative—deals in the company's history. In 2018, Nestlé agreed to pay Starbucks Corp. (SBUX) nearly $7.2 billion for the rights to sell Starbucks-branded coffee in retail stores outside of Starbucks locations. This deal does not allow Nestlé to put its name on Starbucks' products, only to sell those items in retail stores.
The Starbucks deal strengthened Nestlé's already strong footprint in the coffee industry with brands such as Nescafe and Nespresso. Within six months of the agreement, Nestlé already had launched 29 Starbucks products across 40 countries.
Gerber Products Co.
- Type of business: Baby Food
- Acquisition price: $5.5 billion
- Date of purchase: September 3, 2007
Founded in 1927, Gerber Products Co. was acquired by Nestlé in 2007. At the time of the acquisition, Gerber had nearly $2 billion in annual sales and was owned by pharmaceuticals company Novartis AG. In 2019, Nestlé's Nutrition and Health Science division, which includes Gerber, accounted for 16.0% of the company's total sales. Prior to the Gerber acquisition, Nestlé had no major presence in the U.S. baby food market. In recent years, Nestlé has prioritized the development of non-GMO and organic products in order to expand the Gerber brand.
Ralston Purina Co.
- Type of business: Pet Foods
- Acquisition price: $10.3 billion
- Date of purchase: December 12, 2001
Nestlé Purina PetCare was founded as the Robinson-Danforth Commission Co. in 1894 and later became known as Ralston Purina. Under Nestlé, the business has dramatically expanded its global sales and is now called Nestlé Purina PetCare, with popular brands such as Friskies, Pro Plan, and Felix. In 2019, Nestlé's PetCare segment represented 15% of the company's total sales. Ralston Purina fit well with the company's aggressive growth strategy, while also expanding its base beyond its traditional focus on food and beverages for consumers.
Atrium Innovations Inc.
- Type of business: Vitamins and Supplements
- Acquisition price: $2.3 Billion
- Date of purchase: December 5, 2017
Atrium Innovations is a maker of vitamins and nutritional supplements. It started as a subsidiary of a Canadian biotech company before being spun off in 2006. It was acquired by an investment consortium led by private equity firm Permira Funds. As consumers grew more health-conscious, Nestlé moved toward healthier brands and purchased Atrium. The deal boosts Nestlé's participation in the vitamin and supplement market and serves a dual purpose: it expands Nestlé's overall business and helps it to market itself as a healthier company.
- Type of business: Frozen Foods
- Acquisition price: $105 million
- Date of purchase: 1973
Stouffer's was founded in 1922 and went on to build a national chain of restaurants over the next several decades. A key development for the company occurred in 1954, when Stouffer's began to create frozen meals for sale. Today, Stouffer's is best known for its line of frozen food products. Nestlé purchased Stouffer's in 1973 from Litton Industries Inc., a defense contractor that had expanded to offer retail products including microwave ovens. At the time of the acquisition, frozen meals were popular with consumers and Stouffer's was a major brand. Stouffer's, one of Nestlé's earlier deals, provided a template for future forays into healthier foods. In 1981, Stouffer's launched its successful Lean Cuisine line of low-calorie frozen entrées.