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Nestlé buys Freshly for $950M

Nestlé acquired Freshly, a startup that provides home delivery of healthy meals, for $950 million at the end of October. The acquisition comes with the option for additional payouts of $550 million that is contingent on the successful growth of the business, making the total deal potentially worth $1.5 billion.

The Swiss conglomerate took a minority (16%) stake in the meal kit business in 2017 in order to “evaluate and test the burgeoning market.” Since it’s test began, Freshly has grown enormously. Today, the company ships over one million meals per week and is forecast to hit $430 million in sales by the end of 2020.

The lingering pandemic has reignited the meal kit delivery sector with companies like Hello Fresh and Blue Apron posting positive growth numbers since the outbreak of the COVID-19 virus. Freshly has similarly done well, and now its backing by Nestlé has become full-fledged support that can both help the company grow further but also help the world’s largest food manufacturer further align with consumer demand for healthy eating and convenience.

While people continue to eat at home more frequently than they did prior to this past spring, industry surveys have shown that they are looking for more than just a meal. Instead consumers are seeking out functional foods that support immunity, provide targeted nutrition and can deliver a restaurant-quality experience without the requisite preparation. Freshly ticks several of these boxes, focusing on options with less sugar, less processed ingredients, and more nutrients. All meals are gluten-free and single-serve.

“It’s an evolution brought on by the pandemic but taking hold for the long term," said Steve Presley, Nestlé USA CEO in a statement.

Nestlé not only plans to assume the responsibility of Freshly’s operations and distribution full-time, but it also will work to expand the offerings that the meal delivery service offers. Likely, this move will include integrating some of Nestlé’s more popular, better-for-you products in the kits in order to open another avenue for its expansive portfolio to penetrate into consumers' homes.