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Thursday, August 19, 1999 Published at 16:21 GMT 17:21 UK

Business: The Company File

Ice cream alliance

Häagen-Dazs advertising gave rise to a new market for ice cream

The Swiss food company, Nestlé, has formed a 50-50 joint venture with US-based Pillsbury, linking Nestlé's novelty ice cream unit and Pillsbury's Häagen-Dazs frozen dessert business in a bid to snatch a bigger slice of the $11bn American market.

The two units are of similar size and had combined sales of about $600m in 1998. The move will lead to cost savings in operational costs, especially distribution.

Nestlé's strong distribution system as the world's biggest food company would help put Häagen-Dazs products on more shelves in US grocery stores, while its own products, such as Nestlé Crunch and Drumsticks, would also get a boost.

Playing catch-up

Analysts said the move would help Nestlé trim the gap between itself and Unilever, which has 22% share of the American ice cream market, while also gaining ground on Unilever globally.

Nestlé chief executive Peter Brabeck said: "Both partners are already known for their strengths and skills in marketing, and the formation of this joint venture offers us an outstanding opportunity to grow our business in the world's largest ice cream market."

Each company will retain ownership of its brands and applicable technology, which will be licensed to the joint venture.

The American chain of Häagen Dazs ice cream shops will not be included, nor will either company's operations outside the US.

Takeover possibility

Market analysts said this was a logical move, bringing together two ranges of complementary products in a fragmented American market.

But they said it casted doubts on the continued ownership of Häagen-Dazs by Pillsbury, itself owned by London-based food and drinks group Diageo.

"Häagen-Dazs sits uneasily with Pillsbury, and this could be a prelude to its eventual takeover by Nestlé," said one leading food industry analyst.

However, Diageo denied this. A spokeswoman said: "Diageo is not shy of disposals to create value for shareholders, but there are no plans for a sell-off."

The deal is subject to the normal regulatory review process.

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