In a unique Starbucks – Nestlé deal, Nestlé has agreed to pay Starbucks $7.1 billion (£5.2 billion) for the right to sell Starbuck coffee products in external retail outlets. The Swiss firm will be able to market Starbucks coffee in outlets outside of Starbucks cafes. Nestlé markets its own Nespresso and Nescafe coffee products, generating $2 billion in annual sales.
Starbucks – Nestlé Deal Details
Starbucks will provide Nestlé with the green raw beans for the latter to roast itself. Nestlé will then be able to provide the roasted beans to consumers under strict licensing rules from Starbucks. That is as far as the Starbucks – Nestlé deal goes. Nestlé will not use any of the infrastructures of Starbucks and will not be able to market its own products through any Starbucks outlets.
It is strictly a deal to enable Nestlé to sell Starbucks roasted coffee beans to users of its own machines. This will expand the range of coffee products that Nestlé can offer to its own customers.
Nespresso and Dolce Gusto Coffee Machines to Use Starbucks Pods
What will happen is that domestic owners of Nespresso or Dolce Gusto coffee machines will be able to use Starbucks pods to make coffee at home. Not only that, but Nestlé will be able to market Starbucks Coffee products worldwide. Starbucks products will then be available to a much wider consumer base products such as Starbucks ground and instant coffee, and the coffee beans themselves will be available to a significantly larger number of potential users than at present.
The deal will also involve around 500 employees of Starbucks being transferred to Nestlé, although they would continue operating in Seattle. Starbucks has been operating out of Seattle for 47 years now.
Starbucks – Nestlé Deal Beneficial to Both Companies
This Starbucks – Nestlé deal will not only widen Starbucks worldwide appeal but also strengthen Nestlé’s US presence. This is an extension to Nestlé’s recent policy of expanding its reach in this business. In 2017, the company purchased a 68% stake in California firm Blue Bottle Coffee for $425 million.
Nestlé is well known for its instant coffee business, and this deal will begin to get it known for roast and ground coffee which will not only widen its reach, particularly in the US but also earn it a level of respect for its position in the coffee business in general. Nestlé share prices increased 1.5% when news of this unique Starbucks – Nestlé deal was announced today.