Nestle to pay 7.15 bln Dollars for global coffee pact with Starbucks

Nestle to pay 7.15 bln Dollars for global coffee pact with Starbucks

Nestle to pay 7.15 bln Dollars for global coffee pact with Starbucks

That sounds like a lot to use the Starbucks name.

The alliance underlines Nestle's efforts to capture more upscale java drinkers in the U.S., where the maker of Nespresso and Nescafe has been outpaced by JAB Holding Co.

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.

Nestle shares rose as much as 0.8 percent in early Zurich trading. They've dropped about nine percent since the beginning of the year.

Starbucks and Nestlé are both struggling to boost growth, but the sales tie-up between the two companies shows the value of powerful brands. This includes speeding up its share buyback plan.

The company source said it would also pay market-linked royalties to Starbucks. As part of the deal, 500 Starbucks employees will transfer over to Nestle, but will continue to work in Seattle.

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It said the transaction was expected to add to earnings per share by the end of fiscal year 2021 or sooner, with no change to the company's now stated long-term financial targets.

Food giant Nestle on Monday announced a $7.1 billion deal with Starbucks for the rights to sell the chains coffee, tea and food products in grocery stores and other outlets globally. It's now adding Starbucks coffee and tea products to the list.

"With Starbucks, Nescafe and Nespresso, we bring together three iconic brands in the world of coffee", Nestle chief executive officer Mark Schneider said in the statement.

Starbucks, strong mostly in the United States, will have the final say on expanding its product range.

Last year, Nestle paid an estimated $425 million for a 68 percent stake in Blue Bottle Coffee, that sells coffee to customers online and has a number of shops in the USA and Japan.

While Starbucks holds the crown in the US$13.8 billion USA coffee market, Nescafe and Nespresso hold the top ranks globally, according to Euromonitor.

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