Nestlé has struck a deal with Starbucks to acquire its Seattle’s Best Coffee brand.
The deal, announced alongside Nestlé’s trading update today (19 October), strengthens its roster of coffee brands in the US, which include Nescafé, Nespresso and Blue Bottle. Financial terms were not disclosed.
Seattle’s Best Coffee was founded in 1970 by local Seattle residents and brothers Jim and Dave Stewart. It has been part of the Starbucks empire since 2003 and sells an “approachable” line of whole bean, roast and ground packaged coffee, as well as single-use pods across the foodservice and grocery channels.
The transaction, which is expected to close later this year, is the latest deal to be completed between the two coffee giants since signing a ‘global coffee alliance’ in 2018.
The US$1.75bn tie-up gave Nestlé the right to market, sell and distribute Starbuck’s branded products in all global at-home and away-from-home channels, and the two companies have since collaborated to bring new products – including Starbucks branded Nespresso and Nescafé Dolce Gusto pods – to market.
Today, Nestlé distributes Starbucks consumer products and foodservice beverages in 80 markets under the deal. The global sales of Starbucks products distributed by Nestlé in 2021 reached CHF 3.1bn (US$3.11bn).
“Our partnership with Starbucks has confirmed Nestlé’s leading position in the dynamic and growing global coffee market,” said Nestlé’s head of coffee brands David Rennie. “With the well-known Seattle’s Best Coffee brand, we will continue to build our leadership in coffee by offering consumers more choice for their everyday coffee.”
Starbucks’ president for international and channel development, Michael Conway, added: “We continue to deepen our partnership with Nestlé to deliver the best of the Starbucks experience to our customers in channels outside of our retail stores. We’re confident that Nestlé will continue to grow the Seattle’s Best Coffee brand as we focus on our strategy to elevate the premium coffee experience for consumers through the Starbucks brand.”
In the first nine months of 2022, Nestlé’s group sales increased by 9.2% to CHF69.1bn. Sales of coffee grew at a “high single-digit rate”.
Nespresso reported low single-digit organic growth (+3%), following double-digit growth in 2021. Analyst Pascal Boll, of Stifel investment bank, said Nespresso’s results were due to strong comparables and “probably also affected by limited down trading” amid high inflation for consumer packaged goods.
Earlier this year, Nestlé revealed plans to invest EUR100m in one of its largest coffee factories, based in Spain, over the next three years.
The Nescafé owner plans to up its production capacity of instant coffee and coffee capsules at the factory in Girona, Catalonia, and invest in technology to improve sustainability and logistics.