Nestlé Inks Deal to Sell Starbucks Products World-Wide -- Update
May 07 2018 - 3:03AM
Dow Jones News
By Brian Blackstone in Zurich and Anthony Shevlin in Barcelona
Nestlé SA said Monday it agreed to sell Starbucks Corp.'s
consumer and food service products world-wide, as the Swiss company
embraces coffee as a growth opportunity to offset flagging sales
elsewhere.
Nestlé said Starbucks will receive an upfront cash payment of
$7.15 billion plus royalties as part of a global perpetual license.
The business in question has annual sales of $2 billion. The
transaction doesn't include any fixed assets and excludes
Starbucks' ready-to-drink products.
Nestlé said the deal doesn't include sales of products within
Starbucks coffee shops.
Coffee has been highlighted by Nestlé as a priority product
line, along with bottled water, pet care and infant nutrition. Last
September, Nestlé bought a majority stake in specialty U.S. roaster
and retailer Blue Bottle Coffee.
Nestlé has been shaking up its product mix, which stretches from
frozen pizza and bottled water to noodles and medicinal foods. In
addition to the Blue Bottle deal, Nestlé last year bought
California-based Sweet Earth, which makes vegan and vegetarian
products. In June, it bought a minority stake in startup Freshly,
which sells prepared meals directly to U.S. consumers.
In January, Nestlé sold its confectionery business, which
includes the Butterfinger and Baby Ruth brands, to Italian candy
maker Ferrero International SA for $2.8 billion in cash.
Like other large consumer-goods companies, Nestlé has struggled
with competition from local upstarts and a rapid shift in consumer
tastes toward locally grown, organic food. The company has also had
trouble raising its prices.
Nestlé's organic growth, which strips out the effects of
currency changes, acquisitions and divestments, was 2.4% last year.
That was the weakest figure since at least the mid-1990s when
Nestlé started tracking that metric.
About 500 Starbucks employees will join Nestlé; operations will
be located in Seattle, the company said. Nestlé will work jointly
with Starbucks on new offerings under a brand board that will meet
regularly. Starbucks must approve of new products to be sold under
the label.
The Starbucks deal should contribute to earnings and organic
growth starting next year, Nestlé said.
Write to Brian Blackstone at brian.blackstone@wsj.com
(END) Dow Jones Newswires
May 07, 2018 02:48 ET (06:48 GMT)
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