May 7 (UPI) — Nestlé announced Monday it will pay $7.15 billion for rights to sell Starbucks-branded coffee around the world.
Switzerland-based Nestlé, whose coffee business has been struggling, said it will use its international distribution network to sell Starbucks coffee in locations other than the chain’s 28,000 stores.
Nestlé bought the rights to sell Starbucks-packaged coffee in supermarkets, restaurants and catering operations — and will receive only a marketing license, with no fixed assets.
It’s the third-largest transaction in Nestlé’s history.
Of particular interest to Nestlé is the Seattle-based Starbucks’ portioned coffee business. Nestlé’s Nespresso and Dolce Gusto products have lost market share of the K-cup and other portioned coffees to Starbucks, and Nestlé global sales have risen at their weakest pace in 20 years. Nestlé’s Nescafé instant coffee has lost money in four of the past five years.
With the purchase, Starbucks gains a massive up-front payment for perpetual rights, as well as Nestlé distribution channels.
“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Nestlé CEO Mark Schneider in a statement. “With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee.”
The agreement is subject to regulatory approval and is expected to close by the end of this year.
Shares of Nestlé stock, which have fallen 9 percent this year on the Zurich exchange, rose 1.1 percent Monday after the announcement.