Wednesday, May 2, 2018
Source: Reuters
Swiss-based Nestle, the world’s largest food and beverage company, will pay Starbucks Corp $7.15 billion in cash for exclusive rights to sell the U.S. chain’s packaged coffees and teas around the world, tying a premium brand to Nestle’s global distribution muscle.
The agreement announced on Monday could rev up Starbucks’ roughly $2 billion business selling packaged Starbucks coffee, Teavana tea and other products through grocery stores and other retailers, including in China.
The alliance, which amounts to a licensing arrangement, frees Seattle-based Starbucks to focus on improving its mainstay U.S. cafe business, where traffic growth has stalled amid competition from fast-food chains and upscale coffee houses, while rapidly adding shops in China.
Starbucks will use proceeds to increase planned stock buybacks to $20 billion from $15 billion through fiscal 2020. It said the deal would add to earnings per share by 2021.
The agreement also includes Starbucks-branded capsules for Nestle’s Nespresso and Dolce Gusto single-serve brewers, which should help Nestle curb sales of alternatives from other providers.
Nestle expects the alliance to add to its earnings by 2019. It did not alter share buyback plans.
Read more at Reuters.