Bloomberg

(Bloomberg) -- Nestle SA bought a stake in Freshly and aims to help the U.S. startup expand its online subscription service for natural prepared meals nationwide, just as Amazon.com Inc. plans to transform the grocery industry through its $13.7 billion bid for Whole Foods Market Inc.

Nestle was the lead investor in a $77 million funding round and acquired a minority stake, the Vevey, Switzerland-based food company said in a statement Tuesday. Freshly will use the money to add a kitchen and distribution center on the East Coast next year.

The Swiss company said it’s entering the $10 billion U.S. online prepared meals market to gain direct access to consumers who don’t have time to cook. The deal reflects Nestle’s effort to keep up with changing customer tastes by shifting to healthier foods. The Swiss company said last week it may sell its U.S. chocolate and candy business, which analysts estimate may fetch $1 billion to $3 billion. Nestle has spent the past few years revamping its Stouffer’s and Lean Cuisine brands of prepared meals, which it sells via grocery stores.

“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,” Paul Grimwood, chief executive officer of Nestle’s U.S. business, said in the statement.

Freshly, a two-year-old company with 400 employees, makes meals such as Sicilian-style chicken parm with broccoli and roasted turkey with quinoa stuffing, without any artificial flavors, colors or preservatives. Nestle said it will help Freshly in food sourcing and preparation, packaging and advertising.

Jeff Hamilton, president of Nestle’s U.S. food division, will join the board of New York-based Freshly. The company can reach 40 percent of the country’s population and 28 states from its operations center in Phoenix. The East Coast center will increase that to 93 percent, Nestle said.

To contact the reporter on this story: Thomas Mulier in Geneva at tmulier@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Anjali Cordeiro, Phil Serafino

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