Dive Brief:
- Nestlé is acquiring the Seattle’s Best Coffee brand from Starbucks for an undisclosed amount, the company said in a statement. The transaction is expected to close by the end of this year.
- Seattle’s Best, which sells its products in grocery stores and foodservice establishments such as hotels and offices, will help Nestlé grow its coffee portfolio and drive “sustained profitable growth” in the category.
- Coffee has been a strong performer for Nestlé, and one the Switzerland-based company has identified as a core growth areas amid a broad refresh of its portfolio in recent years.
Dive Insight:
Nestlé has built a powerful presence in the coffee space, and the addition of Seattle’s Best doubles down on that bet.
The CPG giant has benefited from increased consumer demand for coffee at home during the pandemic, and consumption remains elevated even now as many people have opted to forgo heading into the office. But even before COVID-19, the company spent big to bulk up its U.S. coffee presence as part of a broader portfolio shift that prioritized categories that had the largest growth potential and where Nestlé could be a market leader.
Nestlé, which for years defined its presence in coffee with Nescafé, Taster’s Choice and Nespresso, purchased a majority stake in the popular coffee shop chain Blue Bottle in 2017. The following year it paid $7.15 billion to Starbucks to sell the chain’s packaged coffee in grocery stores and other outlets around the world.
A major part of the Nestlé strategy has been controlling an entire category, from more mainstream offerings to higher-end brands. The addition of Seattle’s Best continues that plan. In coffee, Nestlé has Blue Bottle and Nespresso in premium, Starbucks in the middle-to-upper end and Nescafe, which is popular among lower-income customers.
Seattle’s Best would likely fit in the lower to the middle and give Nestlé an even more commanding presence on retail shelves while increasing its negotiating power with grocers. It also would expand the range of consumers who use a Nestlé-owned coffee and help the company as more people venture out of the home by traveling or returning to the office.
“With the well-known Seattle’s Best Coffee brand, we will continue to build our leadership in coffee by offering consumers more choice for their everyday coffee,” David Rennie, head of Nestlé Coffee Brands, said in a statement.
Nestlé, which reported strong sales for the first nine months of the year on Wednesday due largely to price increases and a slight uptick in volume, highlighted a strong performance in coffee in North America. It said growth in the beverages category — including Starbucks at-home products, its creamer brand Coffee mate and Nescafé — was close to a double-digit rate.
