The Swiss food giant and US coffee chain have today closed the $7.15bn deal, which was announced in May, giving Nestlé a step up in the premium market both in North America and globally. It is Nestlé's third biggest acquisition ever.
The alliance covers a number of Starbucks’ existing packaged products: including roast and ground coffee, whole beans as well as instant and portioned coffee. Brands included in the deal include Starbucks, Seattle's Best Coffee, TeavanaTM/MC, Starbucks VIA Instant, Torrefazione Italia coffee and Starbucks-branded K-Cup pods (RTD products and sales of any products within Starbucks coffee shops, however, are excluded).
For Nestlé, the alliance ‘significantly strengthens Nestlé’s coffee portfolio in the North American premium roast and ground and portioned coffee business’. For Starbucks, the deal opens the door for global expansion in grocery and foodservice for the Starbucks brand.
As part of the alliance, around 500 Starbucks employees in the US and Europe will join Nestlé; primarily in Seattle and London. The expansion of the business will be led from Nestlé global HQ in Vevey, Switzerland.
Coffee power
The packaged Starbucks brands will join top global brands Nescafé and Nespresso in Nestlé’s portfolio.
Mark Schneider, Nestlé CEO, said: "This partnership demonstrates our growth agenda in action, giving Nestlé an unparalleled position in the coffee business with a full suite of innovative brands.”
Current US retail coffee segment market share
- JM Smucker 26%, including 6% Dunkin brand
- JAB Holding Co / KMG 15%
- Starbucks 15%
- Private label 15%
- Kraft Heinz 14%
- Nestlé 3%
Nestlé's share of the US coffee market currently stands at around 3%: but it has been boosting its presence in the premium segment with acquisitions such as Chameleon Cold-Brew Coffee and Blue Bottle.
Starbucks says the alliance with Nestlé is a ‘significant strategic milestone’ for the growth of its company.
Kevin Johnson, president and CEO, Starbucks, said: "Bringing together the world’s leading coffee retailer, the world’s largest food and beverage company, and the world’s largest and fast-growing installed base of at-home and single-serve coffee machines helps us amplify the Starbucks brand around the world while delivering long-term value creation for our shareholders.”