Nestle’s Ice Cream Move Seen as a Boost for Dreyer’s

Nestle’s long-expected move to acquire complete control of the venture that sells Haagen-Dazs ice cream in the United States gives it more ammunition in its war with Unilever for worldwide ice cream supremacy.

But one beneficiary in this clash of the packaged goods titans could be lesser-known Dreyer’s Grand Ice Cream Inc., the No. 1 U.S.-based ice cream company, which is partially owned by Nestle, analysts said Thursday.

Dreyer’s, which distributes its own brands like Dreamery and Edy’s and also distributes Unilever’s Ben & Jerry’s superpremium brand in U.S. grocery stores, could take over Haagen-Dazs distribution if Nestle decides that combining distribution would be more efficient, analysts said.

“This is a prelude to Dreyer’s winding up getting the (U.S.) Haagen-Dazs distribution,” said Jeffrey Kanter, a food industry analyst at Prudential Securities. “I think Dreyer’s investors have a piece of positive news coming in the not-too-distant future.”

Haagen-Dazs competes with Ben & Jerry’s and others in the superpremium ice cream segment, those rich frozen treats typically sold in pint containers that are often consumed in one indulgent, calorie-filled sitting.

That market so far has not been affected by the recession, with volume holding up well and room for future growth, analysts said.

Nestle’s U.S. unit said Wednesday that it would buy the 50% of Ice Cream Partners USA it did not own from General Mills Inc. for $641 million.

Ice Cream Partners was formed in 1999, combining Pillsbury’s Haagen-Dazs business in the United States with Nestle ice cream novelties like Drumsticks. The venture had about $700 million in sales in 2000.

When General Mills completed its acquisition of Pillsbury from Diageo earlier this year, a change-of-control provision was triggered, allowing Nestle to buy the rest of the venture. Under terms of the deal announced Wednesday, Nestle will have a 99-year license to use the Haagen-Dazs brand in the United States. Minneapolis-based General Mills will maintain ownership of the Haagen-Dazs business outside the United States and Canada.

A Nestle spokesman said Thursday that shifting Haagen-Dazs distribution to Dreyer’s was not under discussion. Management at Ice Cream Partners will not change and the firm could have used Dreyer’s distribution before if it wanted, he said.

But analysts said Dreyer’s distribution system reaches more stores than Haagen-Dazs and would be more efficient. Dreyer’s already distributes Haagen-Dazs in some markets, analysts noted.

A spokesman for Oakland, Calif.-based Dreyer’s could not be reached for comment.

Nestle, based in Switzerland, is the world’s No. 2 ice cream company, with about 9% of the market, behind Unilever, which has 17%, according to a research note by Patrick Hasenbohler, analyst at Switzerland-based Bank Sarasin.

The market is estimated at more than $50 billion.

Dreyer’s shares fell 60 cents to $39.45 on Thursday on the Nasdaq. General Mills rose 49 cents to $52.86 on the New York Stock Exchange. Nestle shares were up less than 1% in Europe.