Swiss food heavyweight Nestlé is selling a 60% stake in the Herta meats unit it put up for review earlier in the year to Casa Tarradellas but will still have exposure to the charcuterie part of the business through a joint venture with the Spanish food company.

Nestlé will hold a 40% stake in the venture, which will continue to supply cold cuts and meat-based products to six existing European countries, and which will also include the Herta dough business in France and Belgium.

The joint venture will be incorporated in Spain. Country-specific operations will continue to be managed by the existing local Herta businesses in France, Germany, Belgium, which also covers Luxembourg, and the UK and Ireland.

Nestlé confirmed previous indications it will retain and develop Herta’s existing vegetarian business, a fast-growing category amid the rising popularity of plant-based foods and an area of focus for the Zurich-listed firm. It bought US-based Sweet Earth in 2017 and Terrafertil in Ecuador the previous year, adding to its Garden Gourmet brand in Europe. 

“It [the joint venture] will be established upon finalisation of employee consultations where required,” Nestlé said in a statement late yesterday (19 December).

The Herta charcuterie and dough business had sales of EUR667m (US$741.6m) last year and has been valued at EUR690m. The deal is expected to close in the first half of next year.

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Marco Settembri, executive vice president and chief executive of Nestlé’s EMENA division, said: “The Herta business has delivered strong performance over the past years and is well-positioned for future growth. We are happy to have Casa Tarradellas as our partner, a family-run business that is a market leader in Spain for pizza, fresh dough and charcuterie.”

Retaining an interest in the charcuterie part of the Herta business may have surprised market watchers somewhat, although retention of the vegetarian segment had been flagged as part of chief executive Mark Schneider’s focus on what he deems to be the “high-growth” plant-based category.

At the same time, Nestlé has been selling off lower-margin parts of its own operations, including the disposal earlier in December of its US ice-cream assets to joint-venture partner Froneri.

Commenting on the Herta deal, Martin Deboo, an analyst at Jefferies, wrote in a research note to clients: “As a one-off compromise, we can live with this [exposure]. But it is to be hoped that Nestlé’s portfolio churn strategy doesn’t lapse into a policy of Balkanisation, as opposed to the intended one of secession.”

He continued: “The tone of the announcement also hints to us at the need to accommodate employment concerns in France and elsewhere. Ultimately, we can live with the deal on its particular merits but are in principle are uncomfortable with the ambiguity and opacity inherent in too much JV’ing.”