Nestle to pay $7.15B to sell Starbucks packaged coffee

Nestle to pay $7.15B to sell Starbucks packaged coffee

Nestle to pay $7.15B to sell Starbucks packaged coffee

The agreement only covers Starbucks' packaged goods sold outside the United States company's stores.

In the third-biggest transaction in Nestle SA's 152-year history, the Swiss food giant will spend $7.15 billion for the right to market Starbucks Corp. products from beans to capsules, marrying its worldwide distribution network with the allure of arguably the biggest name in java.

It is a bold stroke by new Nestle Chief Executive Mark Schneider, who has made coffee a strategic priority as he tries to convince uneasy shareholders, including activist Third Point, that he can boost the sprawling group's performance.

The Starbucks brand will also be represented on Nestle's single-serve capsule systems.

"This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestle", Kevin Johnson, president and CEO of Starbucks was quoted as saying in the Nestle statement.

That sounds like a lot to use the Starbucks name.

The deal also includes the Teavana tea brand, although it excludes ready-to-drink products and all sales within Starbucks coffee shops.

For 2017, Starbucks channel development unit booked a 4% rise in revenue year-on-year - something of a slowdown from the growth rate of 10% reported in the prior year.

Starbucks, strong mostly in the United States, will have the final say on expanding its product range.

While Starbucks holds the crown in the US$13.8 billion USA coffee market, Nescafe and Nespresso hold the top ranks globally, according to Euromonitor. The agreement is expected to close by the end of this year.

"However, Nestle's leadership position is less secure than it once was".

Nestle won't get any physical assets in the deal. Nestle will also put Starbucks in grocery stores outside the US and Canada. And past year, Nestle bought a majority stake in high-end coffee company Blue Bottle.

Nestle CEO Schneider a year ago identified coffee as an area of investment.

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