Starbucks and Nestlé Commit To Sustainable Sourcing in $7.15B Coffee Deal

Posted Thursday, May 10, 2018 9:01 am

Alyssa Danigelis

(Photo Credit: Starbucks)

Starbucks and Nestlé announced a global alliance this week where the Swiss food and beverage company will pay $7.15 billion to market, sell, and distribute Starbucks products. The companies say that the deal is aimed at making coffee the world’s first truly sustainable agricultural product.

Under the terms of the agreement, Nestlé will obtain the rights to market, sell, and distribute Starbucks, Seattle’s Best Coffee, Starbucks Reserve, Teavana, Starbucks VIA and Torrefazione Italia packaged coffee and tea in all global at-home and away-from-home channels.

“Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing,” Nestlé CEO Mark Schneider said.

For its part, Starbucks says the company is committed to buying 100% ethically sourced coffee in partnership with Conservation International. They are also a founding member of the Sustainable Coffee Challenge, a collaborative effort to stimulate greater demand for sustainable coffee that launched during the 2015 Paris climate meetings.

The Challenge says that their vision will be achieved when all coffee is produced meeting sustainable practices that will:

Ensure coffee contributes to improved income and profitability for the 25 million coffee producers, workers, and their families

Implement sustainable agricultural practices to triple productivity on existing 10 million hectares of coffee to sustain supply and enable the sector to meet rising consumption and the growing demand for coffee in a socially and environmentally responsible way

Prevent the clearing of one additional hectare of high conservation-value forest or depleting other natural resources for enhanced coffee production

Prior to announcing the new alliance, both Starbucks and Nestlé made efforts to improve the sustainability of their product packaging. Nestlé is aiming for 100% recyclable or reusable packaging by 2025 while Starbucks invested $10 million in a new consortium to develop fully recyclable and compostable cups.

“The alliance, which amounts to a licensing arrangement, frees Seattle-based Starbucks to focus on improving its mainstay US cafe business, where traffic growth has stalled amid competition from fast-food chains and upscale coffee houses, while rapidly adding shops in China,” Reuters reported. “The agreement will strengthen Nestlé’s position in the United States, where ranks fifth with less than 5% of the market.”

The agreement excludes ready-to-drink coffee, tea and juice products and will be subject to customary regulatory approval. The two companies say the agreement is likely to close this summer or early fall.