Nestle & Starbucks sign $7.2bn pact to better coffee sales in U.S.
Category: #retail  By Saipriya Iyer  Date: 2018-05-07
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Nestle & Starbucks sign $7.2bn pact to better coffee sales in U.S.

In what has been touted as Nestle’s third-biggest transaction since its inception, the food giant has declared to sign a deal worth USD 7.15 billion with Starbucks. Nestle aims to acquire the Seattle-headquartered coffeehouse chain’s rights to sell its coffee products in supermarket stores, catering operations, and cafeterias.

As per the terms & conditions of the deal, next year Nestle is likely to make use of the Starbucks brand in its Nespresso operating unit and Dolce Gusto coffee capsule system. Reportedly, the strategic partnership highlights Nestle’s bid to capture a large share across the U.S. coffee market, which has been dominated by the JAB Holdings Company.

Reports cite that the Luxembourg-based investment firm has invested over USD 30 billion for creating a coffee empire in the U.S. through the acquisitions of Peet’s Coffee and Keurig Green Mountain. Nestle is anticipating that the pact will make significant contributions towards its revenue and earnings per share by 2019. With the announcement of the agreement with Starbucks, Nestle’s shares increased 1.1% in Zurich trading.

The key officials of Starbucks have stated that the firm will use the proceeds to speed up the process of share buybacks for strengthening its ownership. According to the contract signed between the two firms, Starbucks will continue with the production of the coffee brands across North America, while Nestle S.A. will manufacture coffee products in the rest of the regions across the globe. Nestle is likely to register sales and pay royalties to the Starbucks.

For the record, nearly five hundred Starbucks personnel will join Nestle, with the coffee business activities expected to be carried out in Seattle. Both the firms have announced that the deal will be finalized by 2018. Starbucks stated that Nestle will have the rights to sell packaged coffee items under its brands such as Starbucks VIA, Torrefazione Italia, and Best Coffee.



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Saipriya Iyer

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Saipriya Iyer

Saipriya Iyer develops content for Market Size Forecasters, Algosonline, and myriad other platforms. A computer engineer by profession, she ventured into the field of writing for the love of playing with words. Having had a previous experience of 3 years under her bel...

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