Nestle And Starbucks Join Hands To Rejuvenate The Coffee Business
According to recent reports, it has been confirmed that Starbucks and Nestle are joining hands to revitalize their coffee domains. On Monday, Nestle said that the company will pay Starbucks a whopping $7.15 billion in cash in order to attain the rights to sell Starbucks coffee products in Food service and retail channels. The company also confirmed that from next year, it will use Starbucks brand in its Dolce Gusto and Nespresso brands. This is the first time that a big multinational FMCG company such as Nestle has partnered with a leading Coffee rival.
Nestle’s spokesman said that the company is excited to sell Starbucks. The food giant also predicts that its earnings per share will increase as a result of this deal. Nestle has an annual sales revenue of nearly $ 2 billion per year. Meanwhile, Starbucks has said that it will use the cash to boost share buybacks. This alliance highlights Nestle’s struggles to seize more java drinkers in the United States. Nestle has been outpaced by JAB Holding Co in the U.S. when it comes to sales of Nescafe and Nespresso. JAB Holding Co, which is owned by Peimann Family has invested more than $30 billion in creating its coffee empire. The billionaire family has acquired assets such as Peet’s and Keuring Green Mountain. While speaking about Nestle and Starbucks deal, an analyst of Bank Vontobel AG said that this partnership will give a tough time to JAB. Adding further, he said that as a result of this deal Nestle will gain more market share in the United States.
Meanwhile, Starbucks has also confirmed that as part of this deal Nestle will get the right to sell its packaged coffee products under its brands including Starbucks VIA, Torrefazione Italia and Seattle’s Best Coffee. In a statement, the CEO of Nestle Mr. Mark Schneider said that Nespresso, Nescafe and Starbucks are 3 iconic brands in the world of coffee. This is the biggest deal that has been confirmed under Mark Schneider’s leadership at Nestle.
As part of this deal, 500 Starbucks employees are expected to become part of Nestle.