Business World

Tuesday 25 September 2018

Nestlé brews up Starbucks coffee deal

Nestlé, the world's largest coffee company, is close to a deal with Starbucks for the part of its business that sells bagged coffee and drinks in supermarkets, according to media reports yesterday. Photo: Getty
Nestlé, the world's largest coffee company, is close to a deal with Starbucks for the part of its business that sells bagged coffee and drinks in supermarkets, according to media reports yesterday. Photo: Getty

Martinne Geller

Nestlé, the world's largest coffee company, is close to a deal with Starbucks for the part of its business that sells bagged coffee and drinks in supermarkets, according to media reports yesterday.

Any deal between the coffee giants would not involve any of the Seattle-based chain's more than 28,000 cafés, according to Bloomberg, which reported the news after Swiss financial blog Inside Paradeplatz.

The deal could net Starbucks $3.8bn (€3.1bn) after tax, according to Cowen analysts, based on Starbucks' operating earnings excluding its K-Cups and the multiple recently paid for Keurig Green Mountain.

They predicted Starbucks would use that to buy back shares.

An agreement will probably be announced on Monday, Bloomberg said.

Nestlé and Starbucks both declined to comment.

Starbucks, which last week reported a global drop in quarterly traffic to its established cafés, has been revamping its business. It recently sold its Tazo tea brand to Unilever for $384m and closed underperforming Teavana retail stores.

Starbucks previously licensed its business selling packaged coffee to Kraft Foods, but ended the agreement in 2011, giving the business to privately held Acosta.

The cafe chain's partnership with Kraft had been due to end in 2014, but Starbucks sought an early exit and was later forced by an arbitrator to pay $2.76bn to Kraft, which by then had split into two. The payment went to Mondelez International.

Nestlé has various licensing deals with other companies.

Reuters

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