Starbucks, Nestle in $9.48bn partnership

Starbucks2Vienna Swiss food giant Nestle plans to use its global marketing power to sell Starbucks products outside of the US chain’s coffee shops, under a $US7.15 billion ($A9.48 billion) deal that both sides have announced.

Starbucks agreed to sell Nestle the perpetual right to market its coffee and foods products, a business that has been generating annual sales of $US2 billion.

As part of the deal, which is to be closed by the end of the year, some 500 Starbucks employees in Seattle will become Nestle staff.

“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 chief executive Kevin Johnson said.

For Nestle, which already owns the Nescafe and Nespresso brands, the agreement is part of its strategy to focus on promising business segments.

“This transaction is a significant step for our coffee business, Nestle’s largest high-growth category,” Nestle chief executive Mark Schneider said.

GlobalData managing director Neil Saunders said the scale of the deal underlined the strength of the Starbucks brand and Nestle’s desire to use it to drive growth.

“For Starbucks the deal will help to drive brand recognition outside of its core North American and European markets as Nestlé ramps up expansion using its distribution capacity. Arguably, it also allows Starbucks to concentrate more fully on developing its retail business, including the higher end concepts like Reserve Roastery that it is currently rolling out,” he said.

“For Nestle, Starbucks gives it a powerful brand it can add to a coffee armory that is looking a little tarnished. The group has always struggled with market share in North America and this deal essentially buys immediate scale. It also provides numerous opportunities for expansion elsewhere in the world by leveraging the Starbucks brand.”

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