UN Unilever NV

LYON (DOW JONES)-Nestle SA's professional division is hunting for acquisitions as it aims to double sales to cafes and restaurants by 2018.

"Acquisitions are absolutely on the agenda," Nestle Professional Chief Executive Marc Caira told Dow Jones at the Sirha Restaurant and Hotel trade show in Lyon, as he set out the division's plans to cash in further on the fragmented food service market, which is estimated to be worth 500 billion Swiss francs (USD521 billion) a year.

The giant Swiss food company is fighting it out with Kraft Foods Inc (KFT), Unilever PLC (ULVR.LN), Sara Lee Corp (SLE)and HJ Heinz Co. (HNZ) for a larger slice of the food service market which analysts expect to grow in line with the economic recovery.

Nestle Professional, which is based in Vevey, Switzerland and employs 10,000 people, achieved sales of CHF6.2 billion in 2009, with mid-single digit growth in first nine months of 2010.

It has been singled out by Nestle as one of the main drivers for the whole business, and is expected to grow faster than Nestle's overall business which is targeting annual sales growth of 5% to 6%.

Nestle Professional Chief Executive Marc Caira told Dow Jones he would combine organic growth with acquisitions to achieve that target, although he said the first priority was internal growth, "because we believe we can grow internally."

Nestle is interested in acquisitions in the non-carbonated hot and cold beverage business, and also in the flavor-enhancing area, for example soups, stocks, and sauces, Caira said, while organic growth will be led by new products and services to restaurateurs, hotels and café-owners.

"We want to position ourselves better to grow even faster and more profitably than we have in the past," said Caira, who is targeting annual sales increases of 3% to 5% in developed markets and more than 10% in emerging markets.

As well as ingredients, hardware products, like its Viaggi super premium coffee maker, will help the division increase sales, he added.

The machine, which can produce 14 types of hot and cold drinks, will be introduced in the U.K., Italy and Switzerland this year after a successful launch in France last year.

The food service industry is changing to a solution-based model whereby Nestle provides not only equipment, but also servicing and advice for machines, and marketing and menu advice for the customer, Caira said.

New product lines like Viaggi combined with Nestle's research and development muscle should give the company the edge over its rivals, he said.

Caira is confident he can grow the brand, even in the mature North American and European markets which endured a slowdown 2008 and 2009 as cash-strapped consumers ate out less during the economic downturn.

"In this environment we have a lot things we can do. When you have small market share there is always room to grow by taking market share away from others," Caira said.

The food services business is very fragmented with the top five players accounting for only 4% of sales. Nestle has 1.7% of the market.

Emerging markets, which currently make up a third of the total food services market, are expected to grow to account for 50% of the market by 2019, according to Nestle projections.

Caira said that rising disposable income, combined with people moving from rural areas into urban centers means the fundamentals are in place for rapid growth in emerging markets.

Meanwhile new products will be launched in developed markets to target new and faster growing areas like restaurants and convenience stores rather than office canteens and institutional channels where Nestle has traditionally been strongest, he said.

"We cannot just rely on emerging markets for our future. The U.S. is the world's largest food service market, and will continue to be for many years to come. It is a bit flat at the moment, but I cannot sit around hoping for it to come back."

-By John Revill, Dow Jones Newswires; +41 43 443 8042 ; john.revill@dowjones.com

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