Nes­tle buys Blue Bot­tle Cof­fee.

The Mercury News Weekend - - FRONT PAGE - By An­nie Sci­acca as­ci­acca@ ba­yare­anews­group.com

OAK­LAND » Blue Bot­tle Cof­fee, the Oak­land-based cof­fee roaster and re­tailer that gained fame in the Bay Area and well be­yond for its high- end spe­cialty cof­fee, is now part of Swiss food gi­ant Nestlé.

Nestlé and Blue Bot­tle an­nounced the ac­qui­si­tion — a ma­jor­ity stake for Nestlé — on their re­spec­tive web­sites Thurs­day.

Blue Bot­tle Cof­fee will op­er­ate as a stand- alone en­tity, Nestlé said, and the cur­rent man­age­ment and em­ploy­ees will keep a mi­nor­ity stake — 32 per­cent

— and con­tinue to run the busi­ness, in­clud­ing founder James Free­man as chief prod­uct of­fi­cer and Bryan Mee­han re­main­ing in his cur­rent post as CEO.

For Nestlé, the deal marks an en­try into the world of so- called third­wave cof­fee, driven by in­de­pen­dent, spe­cialty roast­ers and fu­eled by ded­i­cated cof­fee- lovers. It’s also a chance for Nestlé to ex­pand its pres­ence in North Amer­ica, build­ing on its Nescafe and Ne­spresso cof­fee brands.

“This move un­der­lines Nestlé’s fo­cus on in­vest­ing in high- growth cat­e­gories and act­ing on con­sumer trends,” said Nestlé CEO Mark Sch­nei­der in a state­ment on the com­pany’s web­site. “Blue Bot­tle Cof­fee’s pas­sion for qual­ity cof­fee and mis­sion-based out­look make for a highly suc­cess­ful brand. Their path to scale is clearly de­fined and ben­e­fits from in­creas­ing con­sumer appreciation for de­li­cious and sus­tain­able cof­fee.”

Blue Bot­tle’s Mee­han and Free­man wrote on a com­pany blog post of their de­ci­sion to sell to Nestlé, call­ing it a “com­plex” one, “in­volv­ing many dis­cus­sions, con­sid­er­a­tions, ques­tions.”

“Nestlé wants to help us re­al­ize our dream of bring­ing Blue Bot­tle Cof­fee to more peo­ple,” they wrote. “Sure, it’s a busi­ness deal. But more im­por­tantly, to us, this deal brings with it an at­ten­dant recog­ni­tion and be­lief in our ac­com­plish­ments.”

Blue Bot­tle, which re­cently cel­e­brated its 15year an­niver­sary, cur­rently has 41 cafes across sev­eral cities, in­clud­ing Oak­land, Berke­ley, San Fran­cisco, Palo Alto, New York, Los An­ge­les, Wash­ing­ton, D.C., and Tokyo, with more planned for Bos­ton and Mi­ami. It has raised mil­lions in fund­ing from in­vest­ment firms and celebri­ties over the years.

Ac­cord­ing to Nestlé, the to­tal num­ber of Blue Bot­tle cafes is ex­pected to reach 55 by the end of the year — up from 29 at the end of last year. The com­pany’s roast and ground cof­fee, as well as its ready-to- drink prod­ucts — such as its car­tons of cold brew and New Or­leans-style iced cof­fee — are sold in gro­cery stores.

It’s a far cry from its early days, when founder Free­man would roast cof­fee in a rented 183- square-foot pot­ting shed on the pa­tio of Oak­land restau­rant Dona To­mas, as he rec­ol­lected in a re­cent com­pany blog post. He would drive the cof­fee around town, to friends and friends- of-friends, hope­ful of re­peat or­ders, un­til it even­tu­ally gained a spot at farm­ers mar­kets, and then small shops.

Fans of Blue Bot­tle, es­pe­cially those who ap­pre­ci­ated the lo­cal brand for its ar­ti­san style, ex­pressed dis­ap­point­ment on so­cial me­dia.

“As some­one who has loved your cof­fee be­fore there were crazy lines, I’m glad you get the credit for great cof­fee. How­ever, usu­ally when this hap­pens qual­ity goes down con­sid­er­ably, and I’m hop­ing that won’t hap­pen,” wrote one com­menter on a Face­book post by Blue Bot­tle that an­nounced the deal.

Other com­menters were less un­der­stand­ing.

“Whoa. And with that, I’m no longer a Blue Bot­tle fan. Nestlé is a bru­tal, in­hu­mane com­pany. Congrats on sell­ing your soul,” wrote a for­mer Blue Bot­tle cus­tomer.

The ac­qui­si­tion by Nestlé is not the first time Blue Bot­tle has had an own­er­ship change. Cur­rent CEO Mee­han led a group of in­vestors in 2012 that pur­chased a con­trol­ling stake in the com­pany, but Nestlé — which bought an­other Oak­land com­pany in its pur­chase of Dreyer’s more than a decade ago — has been dogged by con­tro­versy over its op­er­a­tions over the years that has given it a rep­u­ta­tion as an un­car­ing mega- cor­po­ra­tion.

“Brands live or die on trust and can de­cap­i­tate and de­bil­i­tate fast by un­der­min­ing a trusted re­la­tion­ship with con­sumers,” said Eric Schif­fer, CEO of pri­vate eq­uity firm Pa­tri­arch Or­ga­ni­za­tion, which also pro­vides con­sult­ing in rep­u­ta­tion and brand man­age­ment. “Peo­ple don’t want their cof­fee di­luted — just like they don’t want their brands di­luted, un­less there’s align­ment (among com­pany val­ues).”

Still, Schif­fer said, with the in­fu­sion of cap­i­tal from Nestlé, the dam­age to Blue Bot­tle’s rep­u­ta­tion as a high-end, ar­ti­san com­pany prob­a­bly won’t be dev­as­tat­ing. And for Nestlé, the deal is a way in to the up­scale, ar­ti­sanal cof­fee sec­tor the com­pany has wanted to be in, he ex­plained.

Blue Bot­tle’s Mee­han and Free­man in­sist that the deal is a pos­i­tive one that will al­low the com­pany to scale.

Cus­tomers will likely see more shops, they said in the blog post, and the com­pany’s cof­fee “will only get bet­ter, as it has every year since we opened.”

JANE TYSKA — STAFF PHO­TOG­RA­PHER

Lo­cal re­tailer Blue Bot­tle cur­rently has 41 cafes across sev­eral cities. Ac­cord­ing to Nestlé, the to­tal num­ber of Blue Bot­tle cafes is ex­pected to reach 55 by the end of the year.

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