Nestle takes stake in natural and organic food maker Terrafertil
- Nestle announced Monday it acquired a majority stake in Terrafertil, a Latin American natural and organic plant-based food company, according to a company press release. Financial terms of the deal were not disclosed, but Nestle said it would pick up all of Terrafertil’s operations and assets in the seven countries where it operates.
- Terrafertil was founded in 2005 in Ecuador by three brothers, and has since expanded to Mexico, Colombia, Peru, Chile, the United Kingdom, and most recently, the U.S. It is best known as the world’s largest buyer of goldenberries, an Andean superfood.
- Terrafertil’s founders will be staying on and managing the brand. Nestle said in the release that Terrafertil "will operate as a stand-alone entity, to leverage its unique corporate culture including entrepreneurial spirit, agility and flexibility.”
Nestle is slowly shedding its sugary image, and replacing it with a healthier one. The company, best known for its chocolate, announced it was selling its U.S. candy business to Nutella owner Ferrero Group for $2.8 billion last month.
At the same time, it has been bulking up with the acquisition of organic, plant-based and natural food companies. Nestle invested in plant-based food maker Sweet Earth, and took a majority steak in Blue Bottle coffee last September, before it purchased Chameleon Cold-Brew coffee two months later.
This health ramp up strategy fits with many popular food trends in the U.S. Consumer demand for clean labels, and nutritious, wholesome foods continues to grow, often at the cost of highly processed products, such as Nestle’s Hot Pockets and Stouffer's' brands. The company is divesting itself of what it deems as brands losing ground or lacking sufficient growth, and picking up products consumers are eager to buy. It’s not all that dissimilar from what competing food manufacturers are doing.
Terrafertil is an interesting acquisition for Nestle. It checks the popular organic and plant-based boxes. The company also has received international recognition for its commitment to working with hundreds of small farmers, a desirable quality for many concerned consumers.
For its part, Nestle will be able to expand Terrafertil’s reach and help with marketing and R&D. The Ecuadorian company recently launched in the U.S. in 2017, and its new Swiss partner, with extensive knowledge and experience in the North American country, will help with efficiently getting Terrafertil’s healthy snacks in consumers’ hands.
Acquiring a majority stake in an up-and-coming company comes with its fair share of tradeoffs. It’s a safer bet than risking investment in R&D and a potential flop, but it still is not a guarantee for success. Dr Pepper Snapple first invested in Bai two years ago, and then bought the rest of the company last year for $1.7 billion. Dr Pepper Snapple has struggled at times to integrate the new business into its existing operations, a problem that can occur when big companies pick up smaller ones.
One smart move Nestle and Terrafertil is making in this transaction is keeping the three founding brothers on board to manage the company. This approach helps to maintain the integrity of the brand from a consumer standpoint, and also lets the company innovate and create new products that closely follow consumer wants. By offering Terrafertil Nestle’s resources, and then leaving it alone, the hope would be that the upstart will be able to continue to operate in the way that made them a success in the first place.