SBUX - How Starbucks and Nestle are Benefiting From Their Coffee Alliance
Executives from coffee purveyor Starbucks (NASDAQ: SBUX) and packaged food and beverage behemoth Nestle (OTC: NSRGY) are confident that new products arising from their "Global Coffee Alliance" will help both companies expand global sales, according to a Reuters interview this week.
Reuters jointly interviewed Nestle's head of coffee brands David Rennie, and Starbuck's channel development president, John Culver. Starbucks and Nestle formed the Global Coffee Alliance in 2018 when Nestle paid roughly $7.2 billion for the right to license packaged coffees, teas, and ready-to-drink (RTD) beverages from Starbucks.
The deal supplements various licensing relationships Starbucks has pursued in recent years such as its relationship with PepsiCo, which manufactures and distributes Starbucks-branded RTD products. Licensing has helped Starbucks develop a "capital-light" revenue stream outside of its retail sales and institutional foodservice businesses. The deal has given Nestle access to the Starbucks brand -- as Reuters points out, this helps it compete against privately held JAB Holdings, which owns a number of popular packaged coffee brands that enjoy muscular shelf space in the grocery store channel.