Nestlé And Starbucks Expect Coffee Alliance To Boost Growth

By Donna Ahern
Nestlé And Starbucks Expect Coffee Alliance To Boost Growth

Nestlé and Starbucks expect new products developed under their coffee alliance will help to increase sales, executives from the two companies told Reuters in an interview.

In May 2018, Nestlé paid $7.15 billion for rights to sell Starbucks packaged coffees and teas around the world, freeing up Starbucks to focus on its cafe business.

The alliance is expected to help Nestlé to tackle tough competition in the coffee market from rivals such as JAB Holdings.

"We expect this business to continue to grow for the foreseeable future," Nestlé's head of coffee brands David Rennie said.

"We'll be in 50 markets by the end of this quarter," he said in a joint telephone interview with Starbucks executive John Culver.


A Range Of New Products

Nestlé has developed a range of new products, including Starbucks-branded capsules for its Nespresso and Dolce Gusto single-serve coffee brewers, available in more than 40 markets at the end of 2019.

The company said on Tuesday it was introducing Starbucks premium soluble coffee globally, starting in over a dozen markets including the UK, China, Japan, Brazil and Mexico.

Rennie said soluble coffee was growing very fast in China, but Japan, Australia, Malaysia, Singapore and the UK were also big soluble markets where the new product should do well.

Nestlé this month said it generated incremental sales of around CHF300 million (€282.8 million) with the new products last year, on top of the $2 billion (€1.8 billion) business in North America it acquired from Starbucks.

The coffee business had sales of around CHF18 billion (€16.97 billion) last year, versus total group sales of CHF92.6 billion (€87.3 billion).


John Culver, who looks after international retail growth at Starbucks, said the company was continuing to expand its business and market share in the United States. "But we have a lot of white space for the Starbucks brand outside of North America."

Impact Of Coronavirus

Asked about the impact of the coronavirus, Rennie said Nestlé was seeing an uptick in online orders for its products as people were often confined to home in China, but the infrastructure to supply the goods was not always available.

Culver said Starbucks was taking a long-term view on China and felt it was taking the appropriate action to navigate the situation.

Starbucks and other fast-food companies have ramped up contactless pickup and delivery services in China to keep the virus from spreading.

News by Reuters, edited by Donna Ahern Checkout. Click subscribe to sign up for the Checkout print edition

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