Nestle, Pillsbury to Merge U.S. Ice Cream Operations

The makers of Haagen-Dazs frozen desserts and Drumstick ice cream bars have agreed to combine their U.S. ice cream operations in a joint venture designed to increase sales.

Glendale-based Nestle USA and Pillsbury Co. of Minneapolis would retain ownership of the brands and production technology and license them to the joint venture, which has been temporarily named Ice Cream Partners USA.

The new company would continue to use the popular brand names of Haagen-Dazs for its premium ice cream and frozen yogurt, and the Drumstick, Nestle Crunch and Butterfinger brands for its ice cream bars.

Nestle has been trying for six years to catch up with world leader Unilever, which sells three times as many frozen treats as its rival. The proposed agreement also opens new horizons for Haagen-Dazs, which dominates the U.S. premium market with rivals such as Ben & Jerry’s Homemade Inc.

“It shows Nestle is addressing problems in one of its under-performing businesses,” said Sylvain Massot, an analyst at Morgan Stanley Dean Witter. “Haagen-Dazs is already more profitable in the U.S., and you’d expect to see some savings.”

Nestle’s Drumstick is the No. 3 brand in the novelty ice cream category and Nestle Crunch vanilla ranks fifth among individual novelty items, said Rochelle Brown, director of corporate and brand affairs for Nestle USA. Nestle IceScreamers is the No. 2 brand among children’s frozen novelties.

Under the 50-50 venture, which requires government approval, the new company would have its own management team and a separate board with four directors each from Nestle USA and Pillsbury. But its performance would be reflected in the stocks of Nestle, the U.S. company’s Swiss parent, and Diageo, the British parent of Pillsbury.

In over-the-counter trading, American depositary receipts of Nestle rose 75 cents to close at $97.75 and Diageo’s ADRs fell 63 cents to close at $38.50. Unilever’s ADRs ended up 13 cents at $38.13 on the New York Stock Exchange.

The new company would be located in Northern California. Although a specific site has not been chosen, the location would take advantage of the Haagen-Dazs facility in Tulare and the Nestle plant in Bakersfield, the companies said.