Starbucks agree $7.1bn deal with Nestle
There is no denying Starbucks popularity, given that most cities around the world boast at least one outlet. Besides independent shops Starbucks coffee can be found in service stations, cinemas, hotels, theme parks and aboard aircraft to name just a few.
In a move to take advantage of Starbucks strong international brand, Nestle have agreed a deal enabling them to market Starbucks' coffee in retail outlets outside the cafe chain. Starbucks already generate around $2bn per annum from this side of the business, and with Nestle’s investment its clear they must see strong potential growth in this already oversaturated market.
It’s a smart move from Starbucks partnering with the world's largest food and drinks company. Nestle have a vast distribution network, including large amounts of shelf space in some of the world’s largest retailers. Nestle will be looking to strengthen its US business, with the Starbucks brand helping them resonate with US customers who often lean towards more familiar brands.
Nestle’s Nespresso brand is also another key component of the long-term growth plans between the two businesses. The deal means Nespresso machine owners will be able to buy Starbucks coffee branded pods for use at home.
Keen to keep the business dealings behind the scenes, there will be no cross branded products to prevent any consumer confusion. Nestle are looking to target more premium consumers with this partnership, in an attempt to diversify away from instant coffee. The move represents an opportunity to go into roast and ground coffee supply which for today's millennials is a big growing trend.
