Nestlé and Starbucks Licensing Deal - A New Brew in the Global Coffee Market

Nestlé and Starbucks Licensing Deal - A New Brew in the Global Coffee Market
Case Code: BSTR570
Case Length: 12 Pages
Period: 2018
Pub Date: 2019
Teaching Note: Available
Price: Rs.300
Organization: Nestlé S.A.
Industry: Beverages
Countries: United States
Themes: Strategic Alliances, Business Level Strategy
Nestlé and Starbucks Licensing Deal - A New Brew in the Global Coffee Market
Abstract Case Intro 1 Case Intro 2 Excerpts


Need for the Deal

Nestlé entered the US in 1938 and by the turn of the century it had five main businesses in the US –Nestlé USA, Nestlé Waters North America, Nestlé PurinaPetCare Company, Nestlé Nutrition, and Nestlé Professional. Nestlé USA was named one of “America’s Most Admired Food Companies” by Fortune magazine for 13consecutive years from 1996 to 2009. Nestlé wanted to implement an aggressive strategy in the US as its Nespresso coffee machine was enjoying only limited success in the country. This was because most coffee drinkers in the US avoided small espressos such as those delivered by the Nespresso machines. Nestlé had been struggling to gain market share in the US market, given the success of Starbucks and Keurig Dr Pepper coffee pods (Green Mountain)...

The Deal and the Aftermath...

As part of the deal, Nestlé made a US$7.15 billion upfront payment to get the rights to market and distribute Starbucks packaged coffee and tea through all global at-home and away-from-home channels. That included bags of coffee beans, coffee pods (including bringing Starbucks to the Nespresso platform), and other instant coffees like Starbucks VIA Ready Brew. However, it would not include ready-to-drink beverages...

The Road Ahead

Analysts opined that this deal would give Starbucks a faster means to build its brand in grocery stores across the world which would help it augment its cafe business, particularly in countries where it had partial or no presence. Nestlé, on the other hand, would get access to a well-known, top-tier brand that it could incorporate into its existing systems...


Exhibit I: Starbucks Offerings
Exhibit II: Annual Financials for Starbucks Corporation for the Years 2014-2018
Exhibit III: NestléInc. Consolidated Income Statement for the Six Months Ended June 30, 2018
Exhibit IV: Percentage of adults in U.S Drinking Speciality Coffee (2001-2017)
Exhibit V: Nestlé’s Market Share in 2017
Exhibit VI: Starbucks Nestlé Deal Sentiment
Exhibit VII: Starbucks vs Nestlé Age Distribution

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