To sell Starbucks coffee, Nestle pays $7.2 billion

Nestlé pays $7.15 billion to license Starbucks products

Nestlé Inks Deal to Sell Starbucks Products World-Wide

The Swiss group is to pay $7.15 billion in cash plus royalties.

Let's take a look at how ETFs with Nestle and Starbucks exposure are doing Monday at 11 a.m.

Nestle will pay 7.15-billion dollars for the rights to market and sell Starbucks retail products in grocery stores, restaurants and other outlets globally.

The deal between the two companies will have Nestle handling the the Starbucks brand when it comes to consumer packaged goods and foodservices.

The alliance, which amounts to a licensing arrangement, frees Seattle-based Starbucks to focus on improving its mainstay US cafe business, where traffic growth has stalled amid competition from fast-food chains and upscale coffee houses, while rapidly adding shops in China. The food giant also predicts that its earnings per share will increase as a result of this deal.

This isn't the first time Starbucks coffee has been distributed by another brand.

Nestle shares rose 0.5 percent in early trading after the deal was announced, having fallen by more than 8 percent so far this year. It did not alter share buyback plans.

Nestle has been adjusting its portfolio of products, through sales and acquisitions.

That sounds like a lot to use the Starbucks name.

Nestle CEO Mark Schneider in a statement issued by the company said, "This transaction is a significant step for our coffee business".

"This is all about growth", Schneider told analysts.

Nestle is already big in coffee - it owns Nescafe and Nespresso - and the company said this would boost its market position in North America, while giving it opportunities to sell premium range coffee to consumers overseas. Their JAB Holding Co. has spent more than $30 billion building a coffee empire by acquiring assets such as Peet's Coffee and combining with Mondelez International Inc.'s coffee business. Recent purchases include vegan and vegetarian product maker Sweet Earth and a minority stake in Freshly, a company that sells prepared meals directly to US consumers.

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