‘A great day for coffee lovers’
Nestlé buys rights to sell Starbucks products.
Nestlé is buying the rights to market, sell and distribute Starbucks packaged coffee and tea around the world, the two companies announced Monday.
The $7 billion deal covers the Starbucks brand, plus Seattle’s Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia. They will now be included in Nestlé’s K-cup pods lineup.
“This is a great day for coffee lovers around the world,” Nestlé CEO Mark Schneider proclaimed.
The deal gives Switzerland-based Nestlé, known for its Nescafé and Nespresso coffees, a bigger presence in U.S. supermarkets. For Starbucks, it funnels its packaged brands into Nestlé’s global distribution network.
“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,” Starbucks CEO Kevin Johnson said in a statement.
The coffee chain, headquartered in Seattle, will retain a significant stake as licensor and supplier, the companies said.
The deal includes both packaged coffees sold at supermarkets and for use in food service operations. Excluded are ready-to-drink coffee, teas and juices. The deal, which must get regulatory approval, is expected to close during the summer or early fall.
“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” Schneider said.
While packaged and food service coffees and teas represent $2 billion, or 8% of Starbucks annual sales, they are close to $900 million, or 17%, of its operating income, according to John Zolidis, president of Quo Vadis Capital. Revenues from Starbucks consumer packaged goods grew 12% in fiscal years 2015 and 2016 but slowed to only 4% in fiscal year 2017.
“We speculate that the genesis of this transaction from Starbucks’ per- spective was based in the decelerating growth profile of this business segment,” he said.
The agreement gives Starbucks a bit of good news to share after a weekslong public relations nightmare stemming from the arrests of two AfricanAmerican men in one of the chain’s Philadelphia stores.
The company has apologized repeat- edly for the incident and is closing its 8,000-plus company-owned stores and the corporate offices for the afternoon of May 29 for racial-bias training. The chain also settled with the two victims, though financial terms haven’t been released.
Starbucks said it’ll use the proceeds from the Nestlé deal to repurchase shares.