ZURICH, May 7: Swiss food giant Nestle announced Monday it will pay USD 7.15 billion in cash for the rights to market Starbucks products around the world, outside of the company’s coffee shops.
The agreement gives Nestle, which owns the Nescafe and Nespresso brands, a strong platform for continued growth in North America, the company said in a statement.
Nestle is focusing on coffee as a main growth area and has already made some acquisitions in the sector.
The Starbucks business covered by the deal currently generates around USD 2 billion sales annually and includes coffee beans and ground coffee that Nestle will be selling in supermarkets around the world.
“This transaction is a significant step for our coffee business, Nestle’s largest high-growth category,” said Nestle CEO Mark Schneider in a statement.
“Both companies have true passion for outstanding coffee and are proud to be recognised as global leaders for their responsible and sustainable coffee sourcing,” he said.
The deal does not include any of Starbucks’ coffee shops and cafes.
Around 500 Starbucks staff will join Nestle, the company said, but the operations would continue to be located in Seattle. Both companies would collaborate on “innovation and go-to-market strategies”, it said.
Starbucks president and CEO Kevin Johnson hailed the deal as “historic” and said it would create a “global coffee alliance”.
Nestle, which has been under intense shareholder pressure to improve its profitability, has begun to reposition itself since Schneider took over at the start of last year.
The former head of German healthcare group Fresenius has pushed for the food giant to focus in on a few areas, like bottled water, infant nutrition and pet care, with coffee a top priority.
While Nestle’s Nespresso and other coffee products are omnipresent in Europe, they have had a harder time catching on in the United States.
Over the past 15 months, the company has clearly set its sights on high-end coffee brands in North America. It snapped up a majority share in California-based Blue Bottle Coffee last September, and two months later bought Texas company Chameleon Cold Brew.
At the same time, Nestle has been selling off parts of its confectionary business, handing over its US candy business earlier this year to Italy’s Ferrero for nearly USD 3.0 billion. Analysts hailed Monday’s deal.
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