Sector News

Nestlé takes majority stake in high-end coffee chain Blue Bottle

September 15, 2017
Consumer Packaged Goods

Nestlé has announced it has acquired a majority stake in California-based Blue Bottle Coffee as the Swiss conglomerate aims to bolster its presence in the high-end coffee market.

The world’s largest food and drinks company is understood to be paying $500 million for a 68% stake in Blue Bottle, which operates coffee shops in the US and Japan. Its total number of branches is expected to reach 55 by the end of 2017, up from 29 at the end of last year.

Nestlé said the acquisition will allow it to enter the super-premium coffee shop segment with ‘an iconic brand for discerning coffee drinkers’. It will boost Nestlé’s position in the US coffee market, the largest in the world, and see it compete with JAB investment group, which bought Keurig Green Mountain for $13.9 billion two years ago.

Founded in 2002 by James Freeman, Blue Bottle has raised over $100 million from investors such as Google Ventures, the founder of Instagram and U2 frontman Bono. In addition to retail, the company sells roasted whole bean and ground coffee, and markets ready-to-drink cold brew coffee. Its cafes only serve beans roasted in the previous two weeks.

Blue Bottle will continue to operate as a stand-alone entity as it gains access to Nestlé’s capabilities in coffee and strong global consumer reach. The current management and employees will retain a minority stake and continue to run the business. Bryan Meehan will remain as CEO and James Freeman as chief product officer.

Nestlé CEO Mark Schneider has identified coffee as one of the company’s biggest growth opportunities as he continues investments in niche brands such as meal kit start-up Freshly and plant-based food brand Sweet Earth.

“This move underlines Nestlé’s focus on investing in high-growth categories and acting on consumer trends,” said Schneider.

“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.”

Blue Bottle Coffee CEO Bryan Meehan added: “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 speciality coffee. We felt a real kinship with the team and knew it was the right move for us.”

As part of the deal, Nestlé reportedly has options to buy the remaining stake in Blue Bottle if certain performance criteria are met.


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