The maker of Hot Pockets wants to go vegetarian, California-style.
Nestlé, the world's biggest food and drinks company, is buying husband-and-wife startup Sweet Earth, which sells frozen burritos stuffed with quinoa, beans and other vegetarian ingredients.
The Swiss company, whose frozen food brands include Lean Cuisine and Stouffer's, said Thursday that the deal will increase its presence in the fast-growing market for plant-based foods.
Nestlé, which is based in Vevey, Switzerland, declined to specify the cost of the deal.
Packaged food companies like Nestlé have been looking for ways to appeal to consumers who are favouring fresher foods and are worried about the ingredients they eat. Nestlé recently invested in online meals company Freshly, which delivers cooked meals to customer's doorsteps that it says are gluten-free and don't contain refined sugars.
"This segment has been identified for us globally as a key area a few years ago," said Wayne England, head of strategic food operations at Nestlé. "Giving the world better access to vegetarian-based or plant-based food is something we want to do."
Nestlé USA said Sweet Earth will remain a stand-alone business, and stay at its headquarters in Moss Landing, California.
Sweet Earth co-founder Kelly Swette, who will continue to run the company with co-founder and husband Brian, said in an interview: "We believe in redefining frozen food."
She said several companies approached Sweet Earth about a buyout, but declined to name them. The deal with Nestlé, she said, will help get Sweet Earth into more frozen food aisles. It's currently in more than 10,000 stores, including Walmart and Whole Foods. England said Nestlé wants to protect and grow the Swette's relationship now with 273 Whole Foods stores.
Sweet Earth's bestselling products are its burritos, but it also sells other frozen meals, including mushroom ravioli and veggie burgers.
"At the moment, if you look at the range at Sweet Earth, it's very much hand-held: Burritos, this kind of (product) ... and think we can work with them to extend it into frozen meals," Nestlé's England said. "We can help them accelerate."
In an interview with Forbes magazine in March, Brian Swette had said that Sweet Earth "can choose to be profitable right now if we want to," and planned to invest more once it broke even. He said the company reported to have had $25-million in revenue last year.
Nestlé says the deal will give it "immediate entry" into the plant-based foods segment that is expected to be a $5-billion market within three years. It says up to half of all U.S. consumers are seeking more such foods in their diet.
It said the Sweet Earth acquisition is aimed to complement its growing vegetarian, plant-based offer 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 says the market has been growing in high double-digit percentage rates.
"We would see this Garden Gourmet brand being our Sweet Earth of Europe, and then within that, we would look for the products to be shared," England said.
At its core, the deal is about Nestlé's need to constantly adapt to changing consumer tastes, particularly among health– and "authenticity"-minded consumers like many Millennials these days.
Such consumers "look for more transparency, more natural, more ingredients they understand, that can relate to their own kitchens," England said. "We have a drive to find the trend of authenticity in every one of our products."