Diageo in joint ice cream deal

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THE SWISS food company Nestle, and Pillsbury, a division of the Diageo group, yesterday agreed to form a 50-50 joint venture to strengthen their position in the profitable US ice cream market.

The new company, temporarily called Ice Cream Partners USA, will merge the American assets of Pillsbury's Haagen-Dazs business with those of Nestle's US ice cream division to combine the strength of the Haagen-Dazs brand with Nestle's sophisticated frozen dessert technology. The deal does not include either Haagen-Dazs' US shop chain or the companies' international activities.

John McGrath, chief executive of Diageo, said: "Bringing together two highly focused ice cream businesses will enable us to take advantage of the inherent synergies available."

Nestle's 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 opportunity to grow our business in the world's largest ice cream market."

A spokesman for Nestle said the deal would provide additional distribution opportunities for its hand-held ice-cream range, as well as significant cost reductions. Neither company would put a figure on how much they hoped to reduce costs by or how many jobs would be lost.

Under the terms of the agreement, the parent companies will retain ownership of both the brands and technology and will license them to the joint venture for an undisclosed sum. In 1998, the combined sales of the two divisions was $600m (pounds 372.67m).

Pending US regulatory approvals, the deal is expected to go through in October.