By Barry Eitel
Nestlé announced Monday that it had struck a $7.15 billion deal with coffee chain Starbucks to sell the latter’s famed coffee across the world.
The deal combines one of the world’s most famous brands with the hefty distribution power of Nestlé, the world’s largest food and beverage company. Under the deal’s terms, Nestlé, headquartered in Switzerland, would sell Starbucks products outside of the company’s chain coffeehouses.
Starbucks would continue to source and roast its coffee according to its normal procedures, and the products would stay branded as Starbucks, not Nestlé. The leaders of both companies said it would allow Nestlé to grow its foothold in the United States market and allow Starbucks to expand its reach overseas.
“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 Chief Executive Kevin Johnson said in a statement.
“This historic deal is part of our ongoing efforts to focus and evolve our business to meet changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.”
Starbucks said its packaged goods business, including selling ground coffee and powdered drink mixes, generates $2 billion in revenue every year.
Nestlé owns the popular Nescafe coffee brand and Nespresso coffee machines. The company now plans to produce Starbucks coffee pods for the Nespresso machine.
“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Mark Schneider, Nestlé CEO, in a statement.
"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 a true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world."
Starbucks stock fell slightly amid the news, closing Monday down 0.4 percent at $57.45. On the Swiss stock exchange, Nestlé stock increased about 1.6 percent to close at $77.35.