Nestle to brew high-end coffee with Blue Bottle buy
Nestle has bought a majority stake in California-based Blue Bottle Coffee, marking a first step by the packaged coffee leader into the hipster world of speciality bars that serve high-end, singleorigin and cold brewed coffees.
The company behind Nescafe instant coffee and Nespresso brewers announced the purchase of a 68 percent stake of Blue Bottle on Thursday without disclosing financial terms.
The price was around US $ 425 million, according to a source familiar with the matter.
Like last week’s purchase of Sweet Earth meatless foods, the deal sees the world’s biggest maker of packaged food reaching out to the kind of choosy consumers who are turning away from its mass market brands like Nescafe coffee and Digiorno frozen pizza.
It is the fourth deal this year by new chief executive Mark Schneider, an external hire brought in last year to shake up a conservative Swiss company that had missed its sales targets for four years running. Nestle and its multinational peers are fighting slower emerging markets, competition from new brands and a shift in consumer tastes away from processed food. The company is also selling its U.S. confectionery business, which includes brands like Baby Ruth and Butterfinger, as it seeks to transform itself into a “nutrition, health and wellness” company.
Nestle, Europe’s biggest company by market value, is under pressure too from activist shareholder Third Point. The U.S. hedge fund announced a US $ 3.5 billion stake in June and pressed Nestle for actions such as a margin target and divesting its 23 percent stake in France’s L’oreal.
The U.S. market for coffee drinks has retail sales of US $ 2.9 billion, according to Euromonitor International, which forecasts it to reach US $ 4.4 billion by 2021.
“Starbucks has for a long time had a virtual lock on this category, but that lead is starting to slip,” said Euromonitor analyst said Matthew Barry.
Nestle’s purchase also comes amid consolidation in the so-called third-wave coffee sector in the United States. This market caters to mostly young, urban customers who have grown up on Starbucks but have progressed to more exotic drinks coaxed from hand-operated espresso machines or nontraditional brewers by expert baristas.
Rival third-wave chains also include Intelligentsia and Stumptown, which were swept up in the recent coffee acquisition spree by privately held JAB Holdings.