Nestle is pouring billions for rights to sell Starbucks worldwide

Nestle is pouring billions for rights to sell Starbucks worldwide”

Nestle has entered into an agreement to bring Starbucks products to millions of homes worldwide.

Nestle has stumped up $7.1bn (£5.2bn) in order to convince high street coffee chain Starbucks to license the rights to its global brand.

Nestle chief executive Mark Schneider, who in 2016 became the first outsider to run Nestle in nearly 100 years and who is attempting to boost the company's profit through expansion, described it as a "significant step".

The deal on Monday for a business with $2 billion in sales reinforces Nestle's position as the world's biggest coffee company tries to fortify its place atop a fastchanging market. Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing.

This deal only applies to Starbucks' packaged products outside the United States and doesn't include ready-to-drink coffee, tea or juices.

Around 500 Starbucks staff will join Nestle, the company said, but the operations would continue to be located in Seattle.

The move enhances Nestle's brand among USA coffee drinkers, while Starbucks will gain more brand recognition overseas.

In addition to the cash payment, Starbucks will receive revenue from product sales and royalties. He acknowledged that "the price might appear expensive, but given the returns, the deal could exceed the cost of capital within three to four years".

The agreement is subject to customary regulatory approval and is expected to close this summer or early fall.

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