Specialty Coffee Retailer and Nestlé Brew a Deal -- WSJ

By Brian Blackstone Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 15, 2017).

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ZURICH -- Nestlé SA added to its rapidly growing coffee business by acquiring a majority share in specialty coffee roaster and retailer Blue Bottle Coffee.

Thursday's deal will give the Swiss consumer-products giant a 68% stake for about $425 million, a person familiar with the matter said.

The transaction, though small relative to Nestlé's 89.5 billion Swiss francs ($92.7 billion) in 2016 sales, underscores the packaged-food company's emphasis on coffee as one of the priority parts of its business, while it pares back some of its confectionery business.

Nestlé's coffee unit, which includes Nescafé and Nespresso coffee and Coffee-Mate creamer, generated 2016 sales of 9.1 billion francs.

Blue Bottle had 29 shops in U.S. cities including Washington, New York, Los Angeles and in the San Francisco Bay Area, as well as in Tokyo at the end of last year. It is expected to have 55 stores by the end of this year.

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"This move underlines Nestlé's focus on investing in high-growth categories and acting on consumer trends," said Nestlé Chief Executive Mark Schneider.

Blue Bottle was advised in the deal by J.P. Morgan.

In June, Nestlé cited coffee as one of the high-growth parts of its business in which it plans to focus its investments in addition to infant nutrition, bottled water, pet care and consumer health. It also launched a 20 billion franc share buyback, and put up for sale its U.S. confectionery business that includes Butterfinger and Crunch candy bars.

The moves came amid investor pressure to boost profits and raise Nestlé's share price, which has languished over the past two years. That pressure culminated in late June with the founder of activist investor Third Point LLC, Daniel Loeb, publishing a letter on how Nestlé should change its business. His recommendations included a formal margin target, more share buybacks and a sale of Nestlé's stake in French cosmetics giant L'Oréal SA.

Thursday's announcement continues an acquisition spree by Nestlé in the U.S. as it scrambles to adjust to changing consumer tastes. Last week, Nestlé said it would buy California plant-based foods manufacturer Sweet Earth, which makes vegan and vegetarian products with names like "harmless ham" and "benevolent bacon." In June, it acquired a minority stake in startup Freshly, which sells prepared meals directly to consumers in 28 U.S. states.

Write to Brian Blackstone at brian.blackstone@wsj.com

(END) Dow Jones Newswires

September 15, 2017 02:47 ET (06:47 GMT)