Nestle and Starbucks announced that the former will pay Starbucks $7.15 billion (5.3 billion pounds) in cash for the rights to sell the U.S. coffee chain’s products around the world, tying a premium brand to Nestle’s global distribution muscle.
The deal will strengthen Nestle’s position as the world’s biggest coffee company tries to fortify its place atop a fast-changing market.
The Swiss giant, which boasts Nescafe and Nespresso amongst its brands, will have the right to market Starbucks’ coffee in retail outlets outside the cafe chain. That part of the business currently generates $2bn in annual sales.
A BBC reports show that the deal means Nespresso machine owners will be able to buy Starbucks coffee branded pods for use at home. Consumers will also find Starbucks coffee beans, ground and instant coffee more readily available as Nestle, the world’s largest food and drinks company, uses its vast distribution network to market Starbucks products worldwide.
Nestle’s name will not appear alongside Starbucks’s, but the deal could still help Nestle strengthen its US business, thanks to the powerful High Street coffee brand.
Nestle Chief Executive Mark Schneider, has made coffee a strategic priority as he tries to convince uneasy shareholders, including activist Third Point, that he can boost the sprawling group’s performance.
Analysts commented that Nestle’s third-biggest acquisition will help the Swiss company to expand the brand through its global distribution network.