7 May 2018 | US | Europe

Starbucks and Nestlé forge $7.1bn “global coffee alliance”

Deal will grant Nestlé perpetual rights to market Starbucks’ consumer and foodservice products globally in bid to accelerate global coffee brand’s out-of-home channels
Nestle and Starbucks have agreed to pool their resources in a bid to drive global Consumer Packaged Goods (CPG) and Foodservice sales. The deal will see Nestlé, which already counts brands such as Nescafe and Nespresso among its ranks, marketing Starbucks products outside of the Seattle-based coffee giant’s global café network.

The deal, which will see Nestlé make an upfront payment of $7.15bn to Starbucks, will see the two companies work closely on innovation and go-to market strategies. It grants Nestlé exclusive rights to sell Starbucks’ Reserve, Teavana, Starbucks VIA and Torrefazione Italia packaged coffee and tea, a business which generates $2bn in sales annually.

Starbucks, the world’s largest coffee shop chain, will also create branded capsules for Nestle’s Nespresso and Dolce Gusto single-serve brewers.

"This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé,” said Starbucks President and CEO Kevin Johnson in a press statement.

"This historic deal is part of our ongoing efforts to focus and evolve our business to meet the changing consumer needs, and we are proud to work alongside a company that is committed to our shared values,” he added.

Hailing the deal between the Starbucks, Nescafé and Nespresso brands, Nestlé CEO Mark Schneider said the deal would “bring together three iconic brands in the world of coffee.”

“We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognised as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world,” he added.  

Starbucks said it would use the proceeds from the deal, which is still subject to regulatory approval, to increase planned stock buybacks from $15bn to $20bn by 2020.

The move is the latest in a string of recent deals in the global speciality coffee market. Last year, Nestlé paid an estimated $425m for a 68% stake in Blue Bottle Coffee, a California-based speciality coffee retailer and coffee shop chain.

Traditionally synonymous with instant brands such as Nescafe and its recently revamped Gold Blend range, the Swiss food and beverage giant will now be able to increase its reach in the lucrative and increasingly competitive global speciality market.

Global rival JAB Holdings has also built a formidable coffee empire, swallowing major brands including Douwe Egberts, Panera Bread Co, Peet’s Coffee & Tea, Stumptown Coffee Roasters and Espresso House. Last month the Luxembourg-headquartered investment firm backed Trade, an online speciality coffee retailer based in the US.
 
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