Nestle buys minority stake in U.S. ready meals group Freshly

Nestle (NESN.S) said on Tuesday it has acquired a minority stake in U.S. group Freshly, a provider of direct-to-consumer freshly prepared meals, its latest step to

improve the health profile of its sprawling portfolio.

The Swiss food giant said it was lead investor in a $77 million round of new funding for Freshly, helping it gain access to the $10 billion market for prepared meals in the United States that it said would grow at "very attractive rates".

Nestle did not disclose its exact investment.

The investment will help Freshly build a new East Coast kitchen and distribution centre in 2018 as it prepares to expand its U.S. service nationwide.

Nestle USA's Food Division President Jeff Hamilton would join Freshly's board of directors.

Nestle said last week it may sell its roughly $900 million-a-year U.S. confectionery business, which includes Butterfinger and BabyRuth.

Headquartered in New York with operations in Phoenix, Freshly was founded in 2015 and employs 400.

Nestle USA Chairman and CEO Paul Grimwood said consumers still bought most food in supermarkets but were increasing turning to DTC options.

"Acquiring a position in Freshly not only gives us access to this growth market, but it also brings reciprocal benefits for both companies. Nestle will gain visibility into Freshly's advanced analytics and its highly effective distribution network and Freshly will benefit from our R&D, nutrition and sourcing expertise," he said in a statement.

Its Phoenix facility in the western state of Arizona lets Freshly ship to around 40 percent of consumers. Its new plant in Maryland should let Freshly serve about 93 percent of the U.S. population with prepared meals that can be heated in two to three minutes, Nestle estimated.

"This investment and close partnership will allow Freshly to continue to expand and rapidly scale our reach in order to achieve our goal of being in every household in America," Freshly CEO Michael Wystrach said.

Freshly's subscription-based model offers various meal plans to consumers via a rotating menu on its website.

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