Nestlé brews Seattle’s Best Coffee deal while reporting strongest sales growth in 14 years

19 Oct 2022 --- Nestlé plans to acquire the Seattle’s Best Coffee brand from Starbucks in a deal that is part of Nestlé’s focus on driving sustained profitable growth in the coffee category. The transaction - the terms of which have not been disclosed - also strengthens the Global Coffee Alliance, an initiative between the two companies, which began in 2018. The acquisition comes as Nestlé reports a total sales increase of 9.2% to CHF 69.1 billion (US$69.1 billion) - its strongest sales growth in 14 years.

Despite the “food crisis” and global inflation biting in countries worldwide, consumers have not turned away from Nestlé products in the last nine months as the behemoth reports organic sales rising by 8.5%.

This is the highest nine-month rise since 2008, driven by higher prices when Nestlé raised prices by 6.5% in the first six months of 2022. 

Dynamic and growing global coffee market
The proposed deal “adds depth” to Nestlé’s North America coffee portfolio by further expanding the company’s position in the category, notes the Swiss food and beverage giant. 

Nestlé's acquisition of Seattle's Best Coffee will bolster its North American coffee portfolio.Seattle’s Best Coffee’s approachable line of whole bean, roast, and ground packaged coffee and K-Cup pods are available in a variety of roasts and flavor profiles across both foodservice and grocery channels. 

In addition to Starbucks packaged coffees distributed by Nestlé under the Global Coffee Alliance, Seattle’s Best Coffee joins Nestlé’s roster of coffee brands in the US, including Nescafé, Nespresso and Blue Bottle.

The transaction is expected to close by the end of the year, subject to respective Board and customary regulatory approvals. 

Both companies have agreed to keep the terms of this transaction confidential.

“We continue to deepen our partnership with Nestlé to deliver the best of the Starbucks experience to our customers in channels outside of our retail stores,” says Michael Conway, group president of Starbucks International and Channel Development. “We’re confident that Nestlé will continue to grow the Seattle’s Best Coffee brand as we focus on our strategy to elevate the premium coffee experience for consumers through the Starbucks brand.”

Global Coffee Alliance
Since forming the Global Coffee Alliance four years ago, Nestlé and Starbucks have brought a wide range of premium coffee products to new markets at a fast pace.

These include whole bean coffee, roast and ground coffee, as well as Starbucks capsules for Nespresso and Nescafé Dolce Gusto proprietary systems. It is predicted that Nestlé's organic sales growth will reach 8% for the year.

Nestlé distributes Starbucks consumer products and foodservice beverages across more than 80 markets outside Starbucks retail stores under the Global Coffee Alliance. The total global sales of Starbucks products distributed by Nestlé in 2021 reached CHF 3.1 billion (US$3.1 billion).

Nestlé and Starbucks will continue to work together closely to develop new products and go-to-market strategies that will amplify the reach of the Starbucks brand locally and internationally. 

Full-year 2022 outlook updated
Nestlé expects organic sales growth of around 8%. The underlying trading operating profit margin is anticipated to be approximately 17.0%.

Underlying earnings per share in constant currency and capital efficiency are also expected to increase.

Mark Schneider, Nestlé CEO, flags how the company delivered strong organic growth as it continued to adjust prices “responsibly to reflect inflation.” 

“The challenging economic environment is a concern for many people and is impacting their purchasing power. That’s why we aim to keep products affordable and accessible while considering the interests of all our stakeholders,” he says. 

“Our real internal growth remained resilient despite a high base of comparison and continued supply chain constraints, with limited demand elasticity. At the same time, we continue to invest in R&D, marketing and sustainability initiatives.”

“We remain confident in the strength of our brands, operational execution and underlying category dynamics, which position us well for future growth,” he concludes.

By Gaynor Selby

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