Nestlé USA, the maker of Häagen-Dazs, Baby Ruth, Lean Cuisine and dozens of other mass brands, is moving its U.S. headquarters to Arlington, Virginia’s Rosslyn area, bringing roughly 750 jobs to a part of Virginia struggling with widespread office vacancies.
The world’s largest packaged-food company – which bills itself as a nutrition, health and wellness company – will move in to the region’s tallest building, which has remained vacant since it was completed in late 2013. Nestlé was lured to the area, executives say, by its proximity to lawmakers, regulators and lobbyists – and more than $16 million in state and county subsidies.
“Frankly, this brings us closer to the heartbeat of our industry,” said Paul Grimwood, chairman and chief executive of Nestlé USA, which is part of the global giant Nestlé SA, based in Vevey, Switzerland. “It allows us to collaborate not just with consumers but also with other important stakeholders in Washington and on Capitol Hill.”
The company’s current U.S. headquarters is in Glendale, Calif., where it has come under fire in recent years for bottling water during the state’s record multi-year drought. In 2015, Nestlé – which has nine brands of water, including Arrowhead – removed 36 million gallons of water from a natural forest in California to bottle and sell, prompting public criticism and at least one lawsuit.
Nestlé, founded in 1866, has built itself into a global powerhouse with worldwide sales of around $90 billion in 2015. In addition to Nestlé Crunch, Butterfinger and Toll House, the company’s brands include Hot Pockets, DiGiorno, Nescafe, Boost, Gerber and Purina.
With Nestlé’s move, the Mid-Atlantic region will now boast three major candymakers. Mars, the privately held maker of Snickers, Milky Way and M&M’s, is based in McLean, Va., and Hershey is based in Pennsylvania.
In recent years, Nestlé has made a steady push to remove unnatural flavors and colors from its chocolate bars and reduce the sugar in its Nesquik drink powders. It has also invested in health-care firms and medical device companies, and earlier this year it brought in Ulf Mark Schneider, a former health-care executive, as chief executive of its global operations.
Virginia officials wooed Nestlé for over a year, said Gov. Terry McAuliffe, D. The company considered 20 locations across the country but by October had narrowed its search to Rosslyn and Atlanta.
“Relocation of the Nestlé USA headquarters was under consideration before the election cycle,” said Lisa Gibby, a Nestlé spokeswoman. “We made the decision to come to Washington independent of the election of the president.”
Ultimately, Grimwood said, the state’s incentive package, combined with easy access to transportation and Arlington’s reputation for good public schools, helped seal the deal.
The move brings Nestlé closer to its customers and its productions facilities – 80 percent of the company’s U.S. products are sold east of the Mississippi River, where three-fourths of its 87 U.S. factories are based, Grimwood said. It also helps bring U.S. executives closer to the company’s global headquarters and supports the company’s government-related efforts. Nestlé spent more than $16 million lobbying Congress between 2012 and 2016 on issues related to environmental regulations, trade and labor, according to public records.
For northern Virginia, the arrival of Nestlé USA, which in 2015 had $9.7 billion in sales, serves as proof that it can look beyond defense contractors for growth. The state is now home to more than 70 corporate headquarters, including Volkswagen Group of America, Hilton Worldwide and Capital One Financial.
“For us, it’s perfect,” McAuliffe said, adding that he and Nestlé executives finalized the deal four weeks ago while drinking Virginia wine in California. “We brought in a company that is not dependent on federal government spending. We realize we do have to diversify, which means we have to bring in different types of businesses.”
The commonwealth is offering $10 million in cash grants to Nestlé: $6 million as a Commonwealth Opportunity Fund incentive and $4 million from a Virginia Economic Development Incentive Grant. Arlington County is offering an additional $6 million in incentives – $4 million from performance grants and $2 million in infrastructure updates – as well as additional money for “extensive relocation assistance” to help cover expenses related to the company’s move and training of new hires.
Nestlé will spend an estimated $39.8 million building out its share of the 35-story high-rise. The company will take over 40 percent of the building, or about 206,000 square feet, on the top nine floors. The move will begin this summer and is expected to be complete by late 2018.
Of the 750 positions in Rosslyn, about half will be new hires, Grimwood said. In addition to Nestlé’s corporate operations, the Arlington office will house the company’s confections and beverage businesses, as well as its online division. Nationally, Nestlé has 51,000 employees.
Monday Properties, a New York-based developer, began building 1812 N. Moore St. in 2010 as the country was slowly recovering from the global financial crisis. By the time the high-rise was completed three years later, northern Virginia was reeling from widespread government budget cuts and consolidation among defense contractors. Boeing and Northrop Grumman had both moved out of Rosslyn, leaving behind empty buildings. One-quarter of the suburb’s office buildings remain vacant, according to real estate services firm CBRE.
The 580,000-square-foot building, which rises 390 feet, sat empty for years as its owners searched for a flagship tenant. The Advisory Board Co. considered the building for its new headquarters before deciding to remain in the Washington, D.C., where it received $60 million in tax incentives.
So when Nestlé came calling, Monday Properties was determined to make it work.
“The last six months have been very heated,” said Anthony Westreich, chief executive of Monday Properties. “We’ve been working on 1812 N. Moore St. for over a decade now, but once you have a tenant like Nestlé coming in, that’s going to help get more deals.”
Local business leaders said the Nestlé’s arrival could help open the floodgates for other companies that might not typically look to the Washington area for their headquarters. Bringing in large companies such as Nestlé from other parts of the country is particularly important, said Mary-Claire Burick, president of the Rosslyn Business Improvement District.
“A lot of the commercial deals we’ve seen so far have been one local market piping from another,” Burick said. “What’s so exciting about Nestlé in particular is that it’s coming from another part of the country. This brings unprecedented momentum.”