Nestlé Pays $7.15 Billion to Sell Starbucks Coffee Grounds and K-Cups

08 May, 2018, 02:32 | Author: Sally Reid
  • Nestlé Inks Deal to Sell Starbucks Products World-Wide

Starbucks said Nestle would also obtain the rights to sell packaged coffee products under brands including Seattle's Best Coffee, Starbucks VIA and Torrefazione Italia.

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

Nestle chief executive Mark Schneider, who in 2016 became the first outsider to run Nestle in nearly 100 years and who is attempting to boost the company's profit through expansion, described it as a "significant step".

Knock-off capsules - including Starbucks-branded ones - have dented one of Nestle's largest growth engines, its Nespresso portioned-coffee business. Nestle has reportedly struggled for years with its own products, like Nespresso and Dolce Gusto, in the US.

"It allows Nestle to gain scale in the USA, a weak spot so far", he said. It comes as Nestle's Nescafe brand of instant coffees has lost market share in four of the past five years, according to Euromonitor.

Starbucks, strong mostly in the United States, will have the final say on expanding its product range. The agreement is expected to close by the end of this year. It's now adding Starbucks coffee and tea products to the list. Sales are to be booked by Nestle, which is to pay royalties to Starbucks.

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Other big players are growing as well, including Italy's Lavazza, which is now the world's No 3.

It bought Texas-based Chameleon Cold-Brew in November and took a majority stake in Blue Bottle Coffee, a small upscale cafe chain, in September.

Nestle hinted a year ago that it was looking at focusing on higher-growth areas like pet care, coffee and infant nutrition.

Starbucks, which in April reported a global drop in quarterly traffic to its established cafes, has been revamping its business amid competition in its key home market.

The company's US$425 million purchase of a stake in Blue Bottle Coffee previous year was a step back into the segment, whose growth prospects have revived as coffee consumers become more sophisticated.

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