Nestle, Starbucks expect coffee alliance to boost growth
Nestle paid $7.15 billion in May 2018 for rights to sell Starbucks packaged coffees teas around the world
ZURICH (Reuters) - Nestle and Starbucks expect new products developed under their coffee alliance will help to increase sales, executives from the two companies told Reuters in an interview this week.
In May 2018, Nestle paid $7.15 billion for rights to sell Starbucks packaged coffees teas around the world, freeing up Starbucks to focus on its cafe business. The alliance is expected to help Nestle to tackle tough competition in the coffee market from rivals such as JAB Holdings.
"We expect this business to continue to grow for the foreseeable future,'' Nestle's head of coffee brands David Rennie said.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SBUX | STARBUCKS CORP. | 88.18 | +0.57 | +0.65% |
| NSRGY | NESTLÉ SA | 102.96 | +0.06 | +0.06% |
"We'll be in 50 markets by the end of this quarter,'' he said in a joint telephone interview with Starbucks executive John Culver.
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Nestle has developed a range of new products, including Starbucks-branded capsules for its Nespresso and Dolce Gusto single-serve coffee brewers, available in more than 40 markets at the end of 2019.
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The company said on Tuesday it was introducing Starbucks premium soluble coffee globally, starting in over a dozen markets including the UK, China, Japan, Brazil and Mexico.
Rennie said soluble coffee was growing very fast in China, but Japan, Australia, Malaysia, Singapore and the UK were also big soluble markets where the new product should do well.
Nestle this month said it generated incremental sales of around 300 million Swiss francs ($307 million) with the new products last year, on top of the $2 billion business in North America it acquired from Starbucks.
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The coffee business had sales of around 18 billion Swiss francs last year, versus total group sales of 92.6 billion francs.
REUTERS/Aaron Josefczyk
John Culver, who looks after international retail growth at Starbucks, said the company was continuing to expand its business and market share in the United States. "But we have a lot of white space for the Starbucks brand outside of North America.''
Asked about the impact of the coronavirus, Rennie said Nestle was seeing an uptick in online orders for its products as people were often confined to home in China, but the infrastructure to supply the goods was not always available.
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Culver said Starbucks was taking a long-term view on China and felt it was taking the appropriate action to navigate the situation.
Starbucks and other fast-food companies have ramped up contactless pickup and delivery services in China to keep the virus from spreading.
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($1 = 0.9785 Swiss francs)
($1 = 0.9773 Swiss francs)
(Reporting by Silke Koltrowitz, additional reporting by Hilary Russ in New York. Editing by Jane Merriman)