Published: Tue, May 08, 2018
Markets | By Noel Gibbs

Nestlé Pays $7.15 Billion to Sell Starbucks Coffee Grounds and K-Cups

Nestlé Pays $7.15 Billion to Sell Starbucks Coffee Grounds and K-Cups

Nestle notes that this deal means it will be able to sell consumer packaged versions of Starbucks, Seattle's Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia products.

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.

Knock-off capsules - including Starbucks-branded ones - have dented one of Nestle's largest growth engines, its Nespresso portioned-coffee business. 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.

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It said the transaction was expected to add to earnings per share by the end of fiscal year 2021 or sooner, with no change to the company's now stated long-term financial targets.

Nestlé said the deal will provide it with a "strong platform" in North America as well as opening up "exciting new growth opportunities" with Starbucks premium coffees internationally.

Let's take a look at how ETFs with Nestle and Starbucks exposure are doing Monday at 11 a.m.

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Nestle CEO Schneider past year identified coffee as an area of investment. "Nestle's acquisition track record over the last 10-15 years has been less than stellar", Andrew Wood, an analyst at Sanford C. Bernstein, told Bloomberg.

The agreement does not include bottled drinks like iced coffees and Frappuccinos that are sold in and outside of Starbucks stores.

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 USA and Japan.

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The deal is Nestle's first tie-up with a major rival in coffee.

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