Thursday, 24 May, 2018

Nestle pays $7.15 bn to sell Starbucks products

AFP Nestle pays $7.15 billion to license Starbucks products Nestlé Inks Deal to Sell Starbucks Products World-Wide
Heather Davidson | 10 May, 2018, 14:10

Under the deal, Nestle will pay $7.2 billion to market, sell and distribute Starbucks' packaged coffees and teas around the world, the companies said.

United States market leader Starbucks has a 14 percent share of the market and Nestle, at a not-so-distant number five, has a USA market share of five percent. The coffee company is also expecting the offer to accretive to its earnings per share by the end of its fiscal year for 2021.

Starbucks also notes that it already has plans for the after-tax proceeds that it will get from the $7.15 billion deal. This will have it taking care of selling the chain's at-home and on-the-go coffee products. Bernstein analyst Andrew Wood said that Nestle's third-biggest acquisition would allow the Swiss company to expand the brand through its global distribution network.

The company last sold its United States candies and chocolate business, including brands such as Crunch and Butterfinger, to Ferrero Group for 2.7 billion Swiss francs.

"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", Johnson said.

Nestle expects this business to contribute to its profit in 2019.

Starbucks shares gained 3.2 per cent in premarket trading in NY.

It bought Texas-based Chameleon Cold-Brew in November and took a majority stake in Blue Bottle Coffee, a small upscale cafe chain, in September. The agreement only covers Starbucks' packaged goods sold outside the U.S. company's stores.

Nestle is no stranger to partnering with rivals through licensing deals or joint ventures, having reached arrangements with General Mills and Hershey, among others. Higher sales at the operating segment were primarily driven by increased sales through the global channels and sales of packaged coffee, foodservice and single-serve products.

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