The maker of Hot Pockets wants to go vegetarian, California-style.
Nestle SA, the world’s biggest food and drinks company, is buying husband-and-wife start-up Sweet Earth, which sells frozen burritos stuffed with quinoa, beans and other vegetarian ingredients.
The move echoes efforts by packaged food conglomerates across the globe that have been trying to appeal more to consumers who favor fresher foods and smaller, local brands, and are worried about the ingredients they eat.
Nestle, whose frozen food brands include Lean Cuisine and Stouffer’s, has invested in online meals company Freshly, which delivers cooked meals to customers’ doorsteps that it says are gluten-free and do not contain refined sugars. In 2012, Campbell Soup Co bought natural foods maker Bolthouse Farms.
On Thursday, rival Unilever PLC said it was buying Pukka Herbs, a small, but fast-growing organic herbal tea business.
“This segment has been identified for us globally as a key area a few years ago,” Nestle head of strategic food operations Wayne England said. “Giving the world better access to vegetarian-based or plant-based food is something we want to do.”
Nestle, which is based in Vevey, Switzerland, said that Sweet Earth, which reportedly generated US$25 mlllion in revenue last year, would remain a stand-alone business and stay at its headquarters in Moss Landing, California.
It declined to specify the cost of the deal.
Gaurav Gupta of the strategy management firm Kotter International said that the Sweet Earth and Pukka deals amounted to “another reminder that food businesses need to look outside for innovation and growth.”
Nestle would need to scale up Sweet Earth and draw on its knowledge and processes if it hopes to reap the full benefits from the deal and alter the consumer’s conception, he said. Many people associate Nestle with chocolate and coffee.
“Really changing consumer perceptions will take a shift in products within the core brands, not just adding on some healthier products through acquisitions,” Gupta said in an e-mail.
Sweet Earth cofounder Kelly Swette, who will continue to run the company with cofounder and husband Brian, said in an interview: “We believe in redefining frozen food.”
She said that several companies approached Sweet Earth about a buyout, but declined to name them.
The deal with Nestle will help get Sweet Earth into more frozen food aisles, she added.
Sweet Earth’s best-selling products are its burritos, but it also sells other frozen meals, including mushroom ravioli and veggie burgers.
Nestle says the deal would give it “immediate entry” into the plant-based foods segment that is expected to be a US$5 billion market within three years. Up to half of all US consumers are seeking more such foods in their diet, it said.
The Sweet Earth acquisition is aimed to complement Nestle’s growing vegetarian, plant-based offerings in Europe, such as “charcuterie vegetarian” — essentially plant-based cold cuts — under the Herta brand in France and the launch of the Garden Gourmet line, it said, adding that the market has been growing in high double-digit percentage rates.
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