Nestle makes big bet on America’s thirst for coffee

Swiss company Nestle is doubling down on its bet on America’s thirst for coffee, with the company taking over Starbucks’ retail marketing and sales business for more than $7 billion.

The move comes as Nestle is trying of offset declining sales in other divisions while Starbucks will gain greater global distribution power and a big injection of cash that it could return to shareholders.

Nestle has been adjusting product mix to cater to consumers’ changing tastes, particularly for more organic and sustainable foods.

“We are delighted to have @Starbucks as our partner. We both have a true passion for outstanding coffee, and take pride in responsible and sustainable coffee sourcing,” Nestle said in a tweet discussing the deal.

Nestle has been adjusting its portfolio of products, through sales and acquisitions. Recent purchases include vegan and vegetarian product maker Sweet Earth and a minority stake in Freshly, a company that sells prepared meals directly to U.S. consumers. The company sold its stake in its confectionery business to Ferrero International.

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SBUX STARBUCKS CORP. 76.88 -0.60 -0.77%

Activist investor Dan Loeb recently took a big stake in Nestle.

Nestlé will pay Starbucks $7.15 billion initially, as well as continuing royalties, for the rights to sell its coffee, tea and food products globally. Starbucks maintains the rights to sell the products in its stores.

“This transaction provides Nestlé with a strong platform for continued growth in North America with leadership positions in the premium roast and ground and portioned coffee businesses,” Nestle said in a statement.