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Nestlé announces multi-billion deal to market Starbucks products globally

SEATTLE, U.S. — Starbucks Corporation today announced it will form a global coffee alliance with Nestlé S.A. to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods (CPG) and Foodservice.

With a shared commitment to ethical and sustainable sourcing of coffee, this alliance will transform, expand and elevate both the at-home and away-from-home coffee and related categories around the world.

The agreement grants Nestlé perpetual rights to market Starbucks consumer and foodservice products globally, outside of the company’s coffee shops.

A strong platform for continued growth

This transaction provides Nestlé with a strong platform for continued growth in North America with leadership positions in the premium roast and ground and portioned coffee businesses.

It also allows Nestlé to capture exciting new growth opportunities in the rest of the world with Starbucks premium products. As a complete provider of coffee solutions, Nestlé will accelerate growth in out-of-home channels.

In the United States, it also enhances Nestlé’s retail and Foodservice presence in coffee, complementing its position in instant coffee and super-premium single serve with Starbucks strong presence in K-cup® pods.

The two companies will work closely together on innovation and go-to-market strategies to bring the best coffee to customers around the world.

As part of the alliance, Nestlé will obtain the rights to market, sell, and distribute Starbucks®, Seattle’s Best Coffee®, Starbucks Reserve®, Teavana™, Starbucks VIA® and Torrefazione Italia® packaged coffee and tea in all global at-home and away-from-home channels.

Nestlé to pay $7.15 billion

Nestlé will pay Starbucks $7.15 billion in closing consideration, and Starbucks – with a focus on long-term shareholder value creation – will retain a significant stake as licensor and supplier of roast and ground and other products going forward.

Additionally, the Starbucks brand portfolio will be represented on Nestlé’s single-serve capsule systems.

“This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé,” said Kevin Johnson, president and chief executive officer, Starbucks.

Historic deal

“This historic deal is part of our ongoing efforts to focus and evolve our business to meet changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.”

“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Mark Schneider, CEO, Nestlé. “With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee. We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world.”

As part of this perpetual global license agreement, Starbucks will lead in sourcing, roasting and Starbucks global brand management for the alliance, while the two companies will work closely together on innovation and go-to-market strategies to bring the best coffee to customers around the world.

The agreement is subject to customary regulatory approval and is expected to close this summer or early fall.

The agreement excludes ready-to-drink coffee, tea and juice products

Starbucks intends to use the after-tax proceeds from this up-front payment primarily to accelerate share buybacks and now expects to return approximately $20 billion in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020.

Additionally, the transaction is expected to be earnings per share (EPS) accretive by the end of fiscal year 2021 or sooner, with no change to the company’s currently stated long-term financial targets.

Approximately 500 Starbucks employees will join the Nestlé family to drive performance of the existing business and global expansion.

Operations will continue to be located in Seattle

Starbucks will host a 30-minute investor conference call led by Kevin Johnson at 5 a.m. PDT on Monday, May 7, to provide further details.

The conference call will be broadcast live over the Internet and can be accessed at http://investor.starbucks.com. A replay of the webcast will be available on the company’s website until end of day Wednesday, June 6, 2018.

Nestlé will host an investor conference call led by CEO Mark Schneider and CFO François-Xavier Roger on Monday, 7 May at 7:30 p.m. CEST (1:30 p.m. EST) to provide further details.