VEVEY, SWITZERLAND — Nestle S.A. has entered into a perpetual licensing agreement with Starbucks Corp., Seattle, to market, sell and distribute certain Starbucks coffees and teas at retail and food service outside of Starbucks stores around the world. Nestle is paying Starbucks $7.15 billion for the rights to such brands as Starbucks, Seattle’s Best Coffee, Starbucks Reserve and Teavana, Starbucks Via and Torrefazione Italia.
The components of the Starbucks business Nestle is licensing generate approximately $2 billion in annual sales. The agreement does not include ready-to-drink products. Approximately 500 Starbucks employees will join Nestle as part of the agreement, but operations will remain in Seattle, Nestle said. The agreement is subject to regulatory approval and expected to close by the end of 2018.
“This transaction is a significant step for our coffee business, Nestle’s largest high-growth category,” said Mark Schneider, chief executive officer of Nestle. “With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee. We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing.”
The transaction does not include the sale or transfer of any fixed assets. As part of the agreement, Starbucks will take the lead in coffee sourcing, roasting and Starbucks global brand management, while the two companies will work closely together on innovation and go-to-market strategies around the world.
“This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestle,” said Kevin Johnson, president and chief executive officer of Starbucks. “This historic deal is part of our ongoing efforts to focus and evolve our business to meet changing consumer needs, and we are proud to work alongside a company that is committed to our shared values.”
Starbucks said it intends to use the after-tax proceeds from the up-front $7.15 billion payment primarily to accelerate share buybacks and now expects to return approximately $20 billion in cash to shareholders in the form of share buybacks and dividends through fiscal year 2020.