Nestlé to buy Kraft Pizza 
by Brian Wilson
The Star News
January 7, 2010 —  Only time will tell if the town made famous as the birthplace of Tombstone Pizza will see benefits from the sale of pizza operations by Kraft Foods announced Tuesday.
Company executives are optimistic about the future of the business and its impact on the community. “I think it is a very good thing for Medford,” said Dan Alford, chairman and CEO of Nestlé USA in a phone interview Tuesday afternoon. Nestlé USA based in Glendale, Calif. is the American branch of the multi-national corporation based in Vevey, Switzerland.
Nestlé has agreed to acquire Kraft Foods' frozen pizza business in the US and Canada for $3.7 billion in cash. The business includes brands such as DiGiorno, Tombstone, California Pizza Kitchen, Jack’s and Delissio. The deal is part of maneuvering of the two companies with the sale of the pizza division giving Kraft cash to advance its plans to purchase the British confectionary Cadbury, known for its chocolates.
The sale includes two Wisconsin manufacturing facilities in Medford and Little Chute and the right to take on the leases for the pizza depots and delivery trucks. Kraft Foods anticipates that approximately 3,400 employees will transfer with the business to Nestlé. The transaction is expected to close in 2010 and requires both U.S. and Canadian regulatory approval.
Kraft Foods has been a presence in Medford since it purchased Tombstone Pizza from Ron and Pep Simek in 1986 and the sale announced this week opens a new chapter in the pizza making history of the community.
“We are optimistically looking forward to Nestlé being a presence in our community. We know they will be pleased with the excellent workforce, great management team and superior facilities that are here,” said Medford Mayor Mike Wellner.
"Medford has been fortunate to have Kraft be part of our community for the past 23 years. We look forward to a continued working relationship that is beneficial to Nestlé and our community," said Sue Emmerich of the Medford Area Development Foundation.
According to a press release from Nestlé announcing the purchase: “This frozen pizza business provides a new strategic pillar to Nestlé’s frozen food portfolio in the US and Canada, where the company has already established a leadership in prepared dishes and hand-held product categories under the Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets brands. The acquisition brings leadership in the frozen pizza category, where Nestlé only had a minor presence until now, and builds on Nestlé’s existing pizza know-how and operations in Europe. It is a natural fit with Nestlé’s focus on delivering convenient, premium, wholesome and nutritious frozen food for consumers around the world.”
“I am bullish about the pizza industry,” Alford said, noting the pizza industry is a $37 billion category of the economy with frozen take home pizzas accounting for only about $3 billion of that amount. While Kraft brands have been a dominate player in the frozen pizza market, Alford said he sees room for additional growth.
The US is the largest pizza market in the world with consumer sales of about $37 billion. With estimated sales of $2.1 billion in 2009, Kraft Foods is the leader in the frozen pizza category and has enjoyed double-digit growth in the US and Canada over the last four years.
Leading the way in the emerging premium segment of the market has been the DiGiorno and California Pizza Kitchen brands. These brands provide consumers and families alternatives to eating out and home delivered pizzas. The business also includes other strong brands with Tombstone and Jack’s. In addition, Delissio is the leading frozen pizza brand in Canada.
"This frozen pizza business greatly enhances Nestlé's frozen food activities in North America, bringing together a selection of great US and Canadian brands, industry-leading R&D and excellent route-to-market capabilities, which complement our existing ice cream direct-store-delivery. With total sales of around 3 billion Swiss francs, Nestlé will become the world leader in the attractive, fast-growing frozen pizza category," said Paul Bulcke, CEO of Nestlé in a statement announcing the purchase.
"Selling this business now not only delivers an attractive return for our shareholders, but enables us to better focus our resources on priority global brands and categories," said Irene Rosenfeld, chairman and CEO of Kraft. "Nestlé is well-positioned to continue building these powerhouse pizza brands, given its strength in frozen foods."
Rosenfeld continued, "We are grateful for the hard work and dedication of our talented employees who delivered exceptionally strong results in 2009 and have helped us build this into the number one frozen pizza business in North America. We're confident the business will continue to thrive under Nestlé's ownership. We wish them much continued success."
The business will be part of Nestlé USA. "Our combined capabilities in direct-store-delivery, R&D, innovation and commitment to quality, taste and convenience make this a good strategic fit with our frozen food portfolio," Alford said.
Alford said it is too early in the process to say for certain what changes may occur at the Medford facility which employs approximately 500 people in the community between the pizza manufacturing facilities and the distribution center. He noted that both of the large companies have similar corporate philosophies and that at Nestlé they value the work done by the employees.
Alford said he is looking forward to a future of continued growth in the frozen pizza industry.

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