Eskimo Pie Case

Market position strengthening: the intended acquisition of Eskimo Pie will further strengthen the market position of Nestlé in the frozen novelty industry. As the third leading frozen novelty brands in terms of market share, Eskimo Pie's products were recognized in 98% of all US grocery stores. Moreover, the distribution and market share of Eskimo Pie from 1987 to 1991 both kept growing steadily. These factors would give Nestlé competitive edge in better market presence.

Synergies from licensing, product innovation, and manufacturing: first, by acquiring Eskimo Pie, Nestlé could virtually combine the right to use Eskimo Pie's brand (i.e. the license) with Nestlé's existing production capacity, distribution channel and marketing strategy. Second, Eskimo Pie was very active in product innovation and sensitive to the market demand as evidenced by the ten products being actively sold since their introduction and the increased market share. Nestlé would utilize Eskimo Pie's innovation engine for product development in the future. Third, Eskimo Pie operated three plants in the US that manufactured key ingredients and packaging used by licensees. Last but not the least, it shows that recently Eskimo Pie's operation margins had improved, also making Eskimo Pie a more attractive target.

The acquisition would generate potential synergies with Nestlé's Carnation and Drumstick units. The production facilities of two companies can be combined use, which would be save some production and operation fees to some extent.