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Nestlé-Starbucks Alliance Aims to Make Coffee First Truly Sustainable Ag Product

Image credit: Starbucks

Starbucks Corporation and Nestlé S.A. announced on Sunday that they will form a global coffee alliance to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods (CPG) and Foodservice. With a shared commitment to ethical and sustainable sourcing of coffee, the two companies aim to transform, expand and elevate both the at-home and away-from-home coffee and related categories around the world.

As part of the alliance, Nestlé — the world’s largest CPG company — will obtain the rights to market, sell and distribute Starbucks®, Seattle’s Best Coffee®, Starbucks Reserve®, Teavana™, Starbucks VIA® and Torrefazione Italia® packaged coffee and tea in all global at-home and away-from-home channels. Nestlé will pay Starbucks $7.15 billion in closing consideration, and Starbucks will retain a significant stake as licensor and supplier of roast and ground and other products going forward. Additionally, the Starbucks brand portfolio will be represented on Nestlé’s single-serve capsule systems. The agreement excludes ready-to-drink coffee, tea and juice products.

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“This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé,” said Kevin Johnson, president and CEO of Starbucks. “This historic deal is part of our ongoing efforts to focus and evolve our business to meet changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.”

“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Nestlé CEO Mark Schneider. “With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee. We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world.” 

This global alliance combines the strength and affinity of the Starbucks brand with the global reach of Nestlé’s coffee brands, creating new growth opportunities in the established North American markets and unlocking expansion in international markets. In the US, it also enhances Nestlé’s retail and Foodservice presence in coffee, complementing its position in instant coffee and super-premium single serve with Starbucks strong presence in K-cup® pods. As part of this perpetual global license agreement, Starbucks will lead in sourcing, roasting and Starbucks global brand management for the alliance, while the two companies will work closely together on innovation and go-to-market strategies to bring the best coffee to customers around the world.

Approximately 500 Starbucks employees will join the Nestlé family to drive performance of the existing business and global expansion. Operations will continue to be located in Seattle. The agreement is subject to customary regulatory approval and is expected to close this summer or early fall.

Both Nestlé and Starbucks have been actively working to update their business models and operations to align more closely with today’s health- and sustainability-conscious consumer. In 2015, Starbucks joined Conservation International and Ceres in launching The Sustainable Coffee Challenge — a call to action to make coffee the first sustainably sourced agricultural product in the world, with an aim to convene industry and conservation partners to develop a common framework for sustainability in the coffee sector — at COP21. And in March, Starbucks announced a $10 million commitment in partnership with Closed Loop Partners and its Center for the Circular Economy to develop a more sustainable coffee cup, and the company has designed a new lid for its Nitro Cold Brew Coffee that eliminates the need for a plastic straw.

Under Schneider’s leadership, Nestlé has adopted a new strategic goal to turn itself into a “nutrition, health and wellness” company; to back this up, in January the Swiss food giant sold its US confectionery business to Ferrero for $2.8 billion. And in September, Nestlé acquired a 68 percent stake in Blue Bottle Coffee — whose bespoke, slow-drip brews are beloved by coffee aficionados across the US — in one of a series of deals Nestlé has made with specialist food and beverage operations to shift consumer attitudes against big brands.

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