Food giant Nestle is taking a minority stake in a New Zealand maker of kiwi fruit-based products to prevent and treat constipation, expanding its presence in the field of gastrointestinal diseases.

Nestle, which helped Auckland-based Vital Foods get out of the starting-blocks via its venture capital fund, said the 18 percent stake would allow it to take the small firm's products to the next stage, toward clinical trials and new markets.

We can invest more money in developing clinical trials to support evidence in IBS (irritable bowel syndrome) and, if these work, expand them, Luis Cantarell, chief executive of Nestle Health Science, told Reuters in an interview.

Irritable bowel syndrome is a common functional disorder of the digestive system that can cause stomach cramps, bloating, diarrhea and constipation.

Nestle set up its Nestle Health Science unit and research institute at the beginning of this year to develop foods that should help prevent and treat common health conditions, such as diabetes, obesity, cardiovascular and Alzheimer's disease.

These diseases are becoming ever more frequent as populations in developed economies grow older and governments' strained health care budgets put disease prevention, which Nestle says is one of its priorities, in the spotlight.

Vital Foods, which was founded in 1991 and employs about 20 people, makes functional drinks and dietary supplements to improve the health of the digestive system.

Cantarell said Nestle Health Science would use its existing clinical nutrition business in Australia to conduct clinical studies on IBS with Vital Foods' products.

This is an interesting piece of a puzzle. If it works, we may see opportunities to cross-fertilize with other companies, like the one we bought in the U.S., Prometheus, Cantarell said.

Nestle Health Science recently acquired U.S. gastrointestinal diagnostics firm Prometheus Laboratories, which makes tests and drugs to diagnose and treat inflammatory bowel diseases, for an estimated $1.1 billion.

NESTLE FUND

Cantarell said Nestle Health Science saw Vital Foods as a strategic investment, but did not give any financial details.

Time will tell if we raise our stake. A strategic investment means we have a seat on the board, invest money, start clinical trials, and then we will see, he said.

Before taking the stake, Nestle invested in Vital Foods through its Venture Capital Fund, set up ten years ago to get better access to new science, technology and know-how through acquisitions, minority stakes, licensing and joint-ventures.

The fund is a good way for us to put seeds in companies we want to help, better understand and collaborate with, Cantarell said.

In some cases, it's also just a financial investment. But the fund's main objective has been science and nutrition products. It also has the advantage that we already know all the companies, he said.

Earlier this year, Nestle Health Science bought CM&D, another company in which the fund had invested and which develops dietary treatments for kidney patients.

Cantarell said Nestle Health Science had identified three big areas it wants to develop: gastrointestinal, metabolic and brain health.

For the time being, we develop gastrointestinal health because that is closely linked to what Nestle does, food, he said, adding the company would enter the other areas depending on opportunity.

When you look at the market potential, metabolic health is far bigger than gastrointestinal health, he said.

Nestle built the new unit on its existing healthcare nutrition business which had a turnover of 1.7 billion Swiss francs in 2010, including the 2010 acquisition of Vitaflo which focuses on inherited metabolic disorders.

(Additional reporting by Emma Thomasson. Editing by Jane Merriman)

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