Starbucks just confirmed a previously rumored deal to license its consumer packaged goods business to Nestle, but at a much higher price than expected.
Under a new alliance between the companies, Nestle will pay the Seattle-based coffee giant $7.15 billion for global rights to market, sell and distribute Starbucks’ packaged coffee and tea.
The deal, announced a short time ago, is designed in part to help Starbucks focus on its own stores and cafes, where the company has been increasingly turning to technology to enhance and personalize the experience for its customers.
“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 Starbucks CEO Kevin Johnson in a statement released as part of the announcement. “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.”
Nestle, which owns the Nescafe and Nespresso brands, says it will be able to expand the reach of Starbucks’ coffee and tea products in the consumer packaged goods and food service sectors. In addition to the flagship Starbucks brand, products included in the deal include Seattle’s Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia. The deal does not include ready-to-drink coffee, tea and juice products, according to the companies.
Starbucks says it will “retain a significant stake as licensor and supplier of roast and ground and other products going forward.”
As part of the alliance, Starbucks coffee will also be available on Nestle’s single-serve capsule brewing systems.
The deal is subject to regulatory approval, and the companies say it should close this summer or early fall.
Bloomberg reported on the deal last week, citing an analyst who put the after-tax value for Starbucks at $3.8 billion.