Published: Tue, May 08, 2018
Money | By Bruce West

Starbucks and Nestle join forces

Starbucks and Nestle join forces

Turns out the answer is: Starbucks.

Nestle is paying more than $7 billion to buy the rights to sell Starbucks coffee and tea in supermarkets and other stores outside its coffee shops.

Nestle won't get any physical assets in the deal.

Further, Nestle stated that it will use the Starbucks brand in its Nespresso and Dolce Gusto capsule systems next year. Nestle rose 1.3 per cent as of 1:16 Zurich. The stock has dropped about 9 percent this year.

The deal is Nestle's largest since he began leading the company a year ago.

While Starbucks holds the crown in the US$13.8 billion U.S. coffee market, Nescafe and Nespresso hold the top ranks globally, according to Euromonitor. Eastern time according to Yahoo Finance.

"This will be his first big M&A test". And previous year, Nestle bought a majority stake in high-end coffee company Blue Bottle.

Nestle is making a new offensive in the US a decade after Nespresso renewed a push into that market, enjoying limited success as most coffee drinkers avoid small espressos.

The Nestle name will not appear on Starbucks products.

JAB is the biggest danger for Nestle, MainFirst's Oberhuber said.

Nestle, which will take on about 500 Starbucks employees, said its ongoing share buyback program remained unchanged.

"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", said Starbucks Chief Executive Kevin Johnson. The agreement adds prospects for growth outside of North America, where Starbucks outlets are less prevalent.

Nestle notes that this deal means it will be able to sell consumer packaged versions of Starbucks, Seattle's Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia products.

"This transaction is a significant step for our coffee business, Nestle's largest high-growth category", said Mark Schneider, CEO of Nestle, in a statement.

Nestle CEO Schneider previous year identified coffee as an area of investment. Nestle will also put Starbucks in grocery stores outside the US and Canada. "With Starbucks, Nescafe and Nespresso we bring together three iconic brands in the world of coffee".

"Being a big brand is not an automatic passport to future success", said Peter Walshe, BrandZ global strategy director at Kantar Millward Brown in London.

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