Nestle in $7.1bn Starbucks coffee deal

Nestlé Inks Deal to Sell Starbucks Products World-Wide

Nestlé Inks Deal to Sell Starbucks Products World-Wide

Nestlé agreed to pay Starbucks more than $7 billion to sell the chain's packaged coffee beans, single-serve coffee packs and other products through retail and grocery stores around the world.

The Swiss company also revealed in its announcement that 500 Starbucks employees will transfer over to its business but they will continue to be located at its Seattle headquarters.

The deal for a business with $2 billion in sales reinforces Nestle's position as the world's biggest coffee company tries to fortify its place atop a fast-changing market.

Schneider said that the "global coffee alliance" with Starbucks was "a great day for coffee lovers around the world", adding, "With Starbucks, Nescafe and Nespresso, we bring together three iconic brands in the world of coffee".

Further, Nestle stated that it will use the Starbucks brand in its Nespresso and Dolce Gusto capsule systems next year.

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"It allows Nestle to gain scale in the USA, a weak spot so far", he said.

But it does let Nestle sell Starbucks coffee in individual pods - as it does now with Nespresso and Nescafe - and expand sales of Starbucks soluble coffee, a key market in Asia.

The deal also includes the Teavana tea brand, although it excludes ready-to-drink products and all sales within Starbucks coffee shops. Starbucks said in an announcement that the deal was expected to boost EPS by no later than the end of fiscal 2021; the big upfront payment would help fund some $20 billion in buybacks and dividends through fiscal 2020. Sales are to be booked by Nestle, which is to pay royalties to Starbucks. "Starbucks is the only strong brand in roast-and-ground".

"However, Nestle's leadership position is less secure than it once was". Nestle will also put Starbucks in grocery stores outside the USA and Canada.

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

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