Nestlé Acquires Majority Interest in Blue Bottle Coffee

Nestlé AG has acquired a majority stake in Blue Bottle Coffee. The Swiss food giant, which also owns the Nescafé and Nespresso brands, will pay about USD $425 million for a 68-percent stake in the high-end specialty coffee roaster and retailer based in Oakland, California, according to Bloomberg News.

Blue Bottle Coffee operates coffee shops in major US cities such as New York, Los Angeles, the San Francisco Bay area, and in Japan. Blue Bottle also announced plans to open shops in Boston, Massachusetts. The total number of Blue Bottle shops is expected to reach 55 by the end of this year, up from 29 at the end of 2016. Blue Bottle has also launched premium ready-to-drink and roast and ground products, sold online and in the retail market.

Blue Bottle Coffee will continue to operate as a stand-alone entity, while having full access to Nestlé’s capabilities in coffee and its strong global consumer reach. The current management and employees will retain a minority stake and continue to run the business with the same entrepreneurial spirit that has made the brand so successful. Hence, Bryan Meehan will remain as CEO and founder James Freeman will stay as chief product officer.

“This move underlines Nestlé’s focus on investing in high-growth categories and acting on consumer trends. Blue Bottle Coffee’s passion for quality coffee and mission-based outlook make for a highly successful brand. Their path to scale is clearly defined and benefits from increasing consumer appreciation for delicious and sustainable coffee,” says Mark Schneider, CEO of Vevey, Switzerland-based Nestlé.

With the acquisition of Blue Bottle Coffee, Nestlé is entering the fast-growing, premium coffee shop segment with an iconic brand. Blue Bottle allows Nestlé to strengthen its position in the US coffee market, the largest in the world, as well as internationally, building on success in Japan. It also offers growth opportunities in the premium RTD sector, and roast and ground coffee, largely through online subscription.

Commenting on the acquisition, Bryan Meehan, CEO, Blue Bottle, says, “My goal as CEO has been to secure a sustainable future for Blue Bottle Coffee that would enable it to flourish for many years to come. I’m excited to work with Nestlé to take a long-term approach to becoming a global leader in specialty coffee.”

Matthew Barry, beverages analyst, Euromonitor International, believes the acquisition is an interesting move on the part of Nestlé. “While in the past, rivals like JAB Holdings and Lavazza have been aggressive in adding new brands, Nestlé has preferred to keep the focus on its current coffee brands like Nespresso. It’s not surprising that they would make an exception here though, because this premium coffee space has a lot of potential.” At a corporate level, Barry says Nestlé is trying to become a company more focused on healthier food products. “The fact that they would spend so much money buying Blue Bottle at a time they are thought to be trying to shed some of their unhealthier brands, such as their confectionary products, shows that they think coffee is an important part of that shift.”

Barry says that the acquisition also shows the potential for the RTD coffee market, of which no one company is dominating. “This already a USD $2.9 billion market in the US at retail and is forecasted to reach USD $4.4 billion by 2021.”

Michael Schaefer, global lead – food and beverage, Euromonitor International, adds, “The move also illustrates the importance of coffee shops, particularly high-end ‘third wave’ coffee shop brands such as Intelligentsia, Stumptown, and Blue Bottle to both customer acquisition and branding.” He says that much like the company’s Nespresso boutiques, “Blue Bottle offers Nestlé access to a growing cohort of quality obsessed coffee drinkers, one which the company has struggled to gain traction with in the US. It also secures a position in high-end coffee at a time when JAB Holdings, Nestlé’s biggest rival in global coffee, has taken an extremely aggressive approach to acquisitions.”

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