Nestlé will pay $7.15 billion in cash for exclusive rights to sell Starbucks’ line of packaged coffees and teas around the world.
The deal reinforces Nestlé as the world’s largest coffee company, owning brands such as Nescafé and Nespresso. Starbucks’ packaged products generated annual sales of $2 billion last year.
The licencing agreement also includes Starbucks capsules for Nestlé’s Nespresso and Dolce Gusto single-serve brewers. The Nestlé name will not appear on the products.
Nestlé said the deal will allow it to capture new growth opportunities and the two companies will work closely together on innovation and go-to-market strategies to bring coffee to customers around the world.
The deal includes Teavana tea products and Starbucks capsules for Nestlé’s Nespresso and Dolce Gusto
Last year, Nestlé outlined its plan to focus on high-growth categories such as coffee as it comes under increasing pressure to rejuvenate growth following hedge fund Third Point’s purchase of a 1.25% stake in the company.
Nestlé then bought a majority stake in California-based coffee shop chain Blue Bottle Coffee and acquired US brand Chameleon Cold-Brew.
Meanwhile, Starbucks sold its ready-to-drink iced tea brand Tazo to Unilever for $384 million as it channels its efforts in the packaged tea sector in its Teavana brand.
Starbucks CEO Kevin Johnson
Nestlé CEO Mark Schneider said: “This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category. With Starbucks, Nescafé and Nespresso, we bring together three iconic brands in the world of coffee.
“We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognised as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world.”
Starbucks CEO Kevin Johnson added: “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.
“This historic deal is part of our ongoing efforts to focus and evolve our business to meet the changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.”
As part of the deal, around 500 Starbucks employees will join Nestlé to drive global expansion. Operations will continue to be located in Seattle.
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