Aug 16, 2018

Nestle and Starbucks strike $7.15 a billion world-wide packaged coffee licensing deal

by Aksha Verma
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Swiss-based Nestle, the world’s largest food and beverage company, will pay Starbucks Corp $7.15 billion in cash for exclusive rights to sell the U.S. chain’s packaged coffees and teas around the world, tying a premium brand to Nestle’s global distribution muscle.

The agreement announced on Monday could rev up Starbucks’ roughly $2 billion business selling packaged Starbucks coffee, Teavana tea and other products through grocery stores and other retailers, including in China.

The alliance, which amounts to a licensing arrangement, frees Seattle-based Starbucks to focus on improving its mainstay U.S. cafe business, where traffic growth has stalled amid competition from fast-food chains and upscale coffee houses, while rapidly adding shops in China.

Starbucks will use proceeds to increase planned stock buybacks to $20 billion from $15 billion through fiscal 2020. It said the deal would add to earnings per share by 2021.

In addition to the cash payment, Starbucks will receive revenue from product sales and royalties.

For more details on this deal, visit the site link:

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