Nestle takes over sales of Starbucks in the grocery aisle

Devin Lawrence
May 8, 2018

Starbucks said Nestle would also obtain the rights to sell packaged coffee products under brands including Seattle's Best Coffee, Starbucks VIA and Torrefazione Italia.

About 500 Starbucks employees will join Nestle under the agreement, the Switzerland-based company said.

According to Nestle's chief executive Mark Schneider, who became the first outsider to run Nestle in nearly 100 years in 2016, the deal was a "significant step".

The company last sold its U.S. candies and chocolate business, including brands such as Crunch and Butterfinger, to Ferrero Group for 2.7 billion Swiss francs. Instead, chief executive officer Mark Schneider is harnessing the name recognition of Starbucks, with its 28,000 outlets around the globe and massive draw in the U.S. Nestle has struggled there for years with its own products like Nespresso and Dolce Gusto. The agreement is expected to close by the end of this year.

Schneider has reversed Nestle's policy on roast-and-ground coffee, a category that the company began shunning decades ago, as it considered it a commodity business with little value to add.

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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. Sales will be booked by Nestle, which will pay royalties to the coffee chain. The transaction excludes items sold through Starbucks coffee shops and ready-to-drink products that are produced under a joint venture with PepsiCo.

"However, Nestle's leadership position is less secure than it once was".

Nestle, the world's largest packaged food company, is also not shy when it comes to partnering with rivals through licensing deals or joint ventures, having reached arrangements with General Mills' and Hershey, among others.

Last year, Nestle paid an estimated $425 million for a 68 percent stake in Blue Bottle Coffee, that sells coffee to customers online and has a number of shops in the US and Japan.

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