Nestle plans to pay Starbucks $7.15 billion cash for the right to market and sell Starbucks products around the world. This deal with Starbucks will not give Nestle any physical assets; however, just the brand recognition of Starbucks alone could potentially give Nestle a huge boost. Last year, Nestle’s sales revenues rose more slowly than they have in the past two decades. Nestle’s own coffee products, such as Nespresso, have not been doing well in previous years.
According to Alain Oberhuber, an analyst at MainFirst Bank in Zurich, “Nestle needed a bigger brand, and they needed one fast. Starbucks is the only strong brand in roast-and ground.” This is likely the main reason for the big purchase. Nestle has struggled with getting people to want to drink small espressos instead of coffees from big brand name restaurants, like Starbucks.
So what will the future of this deal be? Apparently, Starbucks will keep producing their packaged coffee in North America, and Nestle will do this for the rest of the world. Nestle will write sales to their books but will then pay royalties to Starbucks. Starbucks hopes that this deal will allow for more growth outside of North America in other parts of the world.
Want more insights from our expert network? Subscribe to the Worthix Newsletter for a monthly summary of all things Customer Experience, and be the Voice of CX in your workplace or friend group.
Meet the Worthix Content Team. We’re dedicated to bringing our readers value from the crossroads of CX thought leaders, industry experts, on-the-ground CX practitioners and top academics from around the world.