Nestlé said it has agreed to acquire the Seattle’s Best Coffee brand from Starbucks, further strengthening the Nescafe and Nespresso owner’s coffee business in the US. The world’s largest packaged-food maker, which already sells a range of packaged coffee in grocery stores and food service locations, didn’t disclose the terms of the deal, but it is expected to close before the end of the year.
“Our partnership with Starbucks has confirmed Nestlé’s leading position in the dynamic and growing global coffee market,” said David Rennie, head of Nestlé Coffee Brands, in a press release. “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.”
Founded in 1970 as a more approachable line of coffee, Seattle’s Best generally offers a lower price point than its flagship Starbucks brand. The Seattle’s Best Coffee business, which includes whole bean, roast and ground packaged coffee as well as K-Cup pods, was acquired by Starbucks back in 2003. Now, the acquisition will allow Nestlé to add Seattle’s Best Coffee to the Global Coffee Alliance, a partnership between Nestlé and Starbucks that was formed in 2018.
Since then, the perpetual licensing agreement between the two companies has allowed Nestlé to sell and distribute some Starbucks products at retail and food service locations outside Starbucks stores around the world. Nestlé paid Starbucks $7.15 billion as part of the agreement and made $3.09 billion selling Starbucks products in 80 markets around the world in 2021 alone.
“We continue to deepen our partnership with Nestlé to deliver the best of the Starbucks Experience to our customers in channels outside of our retail stores,” said Michael Conway, group president, Starbucks International and Channel Development, in the same press release. “We’re confident that Nestlé will continue to grow the Seattle’s Best Coffee brand as we focus on our strategy to elevate the premium coffee experience for consumers through the Starbucks brand.”
Nestlé group saw sales climb 9.2 percent to nearly $69 billion in the first nine months of this year, boosted by price hikes across its range of products. However, coffee sales have shrunk from double digit percentage growth in 2021 to single digits so far this year. Sales of Nestlé’s flagship Nespresso coffee pods have grown just 0.4 percent to $4.7 billion.
Despite this, coffee has been a consistently strong point in Nestlé’s portfolio, which ranges widely from confectionery and bottled water to supplements and pet food. Last year, coffee products contributed more than $25 billion, or approximately 27 percent of Nestlé’s total sales.
The acquisition comes amid an ongoing coffee shortage in Brazil and Vietnam, the world’s largest coffee producers. Coffee giants, including Starbucks and Nestlé, will absorb consequential price hikes and pass them on to the customer. While Seattle’s Best Coffee has always been a lower-cost alternative to Starbucks, its prices could rise as a result of the shortage and/or the acquisition.