Nestlé USA bets on Freshly, following Amazon’s Whole Foods grab
Nestlé USA has acquired a minority stake in online meal provider Freshly, the latest gauntlet thrown down in the contest to deliver food quickly. Amazon.com Inc.’s (Nasdaq: AMZN) announced $13.7 billion purchase of Whole Foods market Inc. (Nasdaq: WFM) is already changing the M&A battleground.
"While most food choices are still made in supermarkets, it's clear that consumers are responding to a growing universe of direct-to-consumer options, made possible through innovation," says Nestlé USA CEO Paul Grimwood. The company is leading a new $77 million funding round for Freshly. The terms of Nestlé USA's investment were not disclosed. Nestlé USA owns the DiGiorno, Häagen-Dazs and Hot Pockets brands, and recently put its U.S. candy business up for sale.
Freshly, founded in 2015 and based New York, uses a subscription service model to cook meals and deliver them directly to consumers. The target's menu consists of 30 combinations including: Sicilian-style chicken parmesan with broccoli and steak peppercorn with sauteed carrots and asparagus, that can be heated in three minutes or less. In Addition to Nestlé USA, Freshly has received funding from Highland Capital, Insight Venture Partners and White Star Capital.
Amazon’s Whole Foods deal puts pressure on other smaller companies to grow more quickly. Consumers are making everyday purchases and are demanding orders delivered more quickly, and Amazon is aiming to offer delivery in under an hour. Some companies that may feel heat include online restaurant delivery provider GrubHub Inc. (NYSE: GRUB) and Instacart. The latter is a startup that provides online shoppers with same-day delivery service from a variety of retailers.
“Very often a given deal will ignite activity within a sector, and the Whole Foods deal is certainly likely to do that, at least in the grocery channel and perhaps in retail generally,” said Robert Profusek, a partner with Jones Day. “For many corporate actions, there are not equal and opposite, but exaggerated reactions, especially when the first action is taken by a disruptor.”