Geneva

Nestle SA bought a stake in Freshly and aims to help the US start-up expand its online subscription service for natural prepared meals nationwide, just as Amazon.com Inc plans to transform the grocery industry through its $13.7 billion bid for Whole Foods Market Inc Nestle was the lead investor in a $77 million funding round and acquired a minority stake, the Vevey, Switzerland-based food company said in a statement Tuesday. Freshly will use the money to add a kitchen and distribution centre on the East Coast next year.

The Swiss company said it’s entering the $10 billion US online prepared meals market to gain direct access to consumers who don’t have time to cook. The deal reflects Nestle’s effort to keep up with changing customer tastes by shifting to healthier foods. The Swiss company said last week it may sell its US chocolate and candy business, and spent the past few years revamping its Stouffer’s and Lean Cuisine brands of prepared meals, which it sells via grocery stores.

Nestle is jumping into a business that’s rapidly becoming more competitive. Amazon is making its biggest push yet into the grocery market with its plan to buy Whole Foods, which will give consumers more ways to buy produce online, raising competition for meal-delivery services. Companies such as GrubHub Inc deliver food from restaurants and Blue Apron Holdings Inc and Sun Basket make meal kits — boxes of pre-portioned ingredients and instructions for customers to cook at home.

“While most food choices are still made in supermarkets, it’s clear that consumers are responding to a growing universe of direct-to-consumer options, made possible through innovation,” Paul Grimwood, chief executive officer of Nestle’s US business, said in the statement.

Freshly, a two-year-old company with 400 employees, makes meals such as Sicilian-style chicken parm with broccoli and roasted turkey with quinoa stuffing, without any artificial flavours, colours or preservatives. Nestle said it will help Freshly in food sourcing and preparation, packaging and advertising.

Jeff Hamilton, president of Nestle’s US food division, will join the board of New York-based Freshly. The company can reach 40 per cent of the country’s population and 28 states from its operations centre in Phoenix. The East Coast centre will increase that to 93 per cent, Nestle said.

Blue Apron said Monday it aims to raise as much as $510 million in an initial public offering. Sun Basket recently sold a stake to Unilever’s venture arm and hired Bank of America Corp. and Jefferies Group LLC to lead its own IPO.