Nestlé and Starbucks Licensing Deal - A New Brew in the Global Coffee Market
Case Code: BSTR570
Case Length: 12 Pages
Pub Date: 2019
Teaching Note: Available
Organization: Nestlé S.A.
Countries: United States
Themes: Strategic Alliances, Business Level Strategy
Abstract Case Intro 1 Case Intro 2 Excerpts
The case is about the strategic alliance between US-based food and beverage company Starbucks Corporation (Starbucks) and Switzerland-based food company Nestlé S.A. (Nestlé), which gave Nestlé the perpetual rights to sell the packaged food products of Starbucks globally. Through this association, the two companies would work closely together on innovation and on marketing Starbucks’ products globally.
Starbucks was looking at ways to distribute its products globally, but did not have the capabilities to do so on its own. Developing a new distribution system was not a cost effective solution. Earlier, the company had entered into a partnership with Kraft Heinz to market its products, but it later called off the deal alleging that Kraft had mishandled the distribution. Nestlé was looking at expanding its presence and appeal in the US market, where it’s Nespresso was facing competition from several players.
The market for coffee in the US had been experiencing constant growth, and taking advantage of this, JAB, a Germany-based company, was consolidating its position in the coffee market through acquisitions. Nestlé was facing huge competition from JAB too. It was also looking at resonating with younger consumers, and coffee was one of its key strategic areas. The alliance was expected to benefit both companies, with Starbucks gaining a global presence and Nestlé reaching more consumers.
Nestlé paid US$ 7.15 billion to obtain the rights to market and distribute Starbucks packaged coffee and tea globally. It remained to be seen what the deal would bring for both the companies.
The case is structured to achieve the following teaching objectives:
- Analyze the concept of strategic alliances
- Understand the possible advantages of strategic alliances
- Assess the future prospects of the alliance in light of the rapidly changing external environment
- Critically analyze the key factors that would influence the success of an alliance
Strategic Alliance, Competitive Advantage, Competition, Synergy, Global branding, Starbucks, Nestlé, Licensing, Target Marketing
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