Nestle, Starbucks team up for global coffee alliance
11 May, 2018
The Swiss-based Nestle, the world's largest food and beverage company, announced last Monday it has bought for $7.15bn in cash the exclusive rights to sell the US chain Starbuck's packaged coffees and teas around the world. The agreement could rev up Starbucks' roughly $2bn business selling packaged Starbucks coffee, Teavana tea and other products through grocery stores and other retailers, including in China. The deal gives Nestle, known for its Nescafe and Nespresso coffees, a bigger presence in US supermarkets.
Nestle CEO Mark Schneider said he expects the alliance to boost Nestle in North America and benefit Starbucks in China, which is Nestle's second largest market. In the US, Nestle ranks fifth with less than 5% of the market. Market leader Starbucks has a 14% share, according to Euromonitor International. Other big players are growing as well, including Italy's Lavazza, which is now the world's No. 3.
“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,” Starbucks CEO Kevin Johnson said in a statement. Nestle, which will take on about 500 Starbucks employees, will not buy any industrial assets as part of the deal.
Analysts agreed that the alliance could strengthen Nestle's position as the world's biggest coffee company in a fast-changing landscape. In January, Nestle sold its US confectionery business to Ferrero. It had been losing ground in the United States confectionery sector as rivals moved towards healthier products.