Nestle is all set to acquire Nespresso from Starbucks and said the acquisition of Seattle’s Best Coffee will add depth to its portfolio of North American brands.
The owners of Nescafe and Nespresso are expanding their coffee business in the United States. The largest The world’s largest packaging maker announced Wednesday that the acquisition of the brand, which sells packaged coffee in grocery stores and workplaces such as universities and hotels, will add depth to its North American portfolio. Nestlé did not disclose the terms of the deal.
News of the acquisition came as Nestlé raised its full-year sales guidance after higher sales prices boosted its performance in the nine months to 2022.
Coffee has been one of Nestlé’s best business categories in recent years. The company’s coffee products benefited from consumers drinking more beer at home during the pandemic, and demand remained high, which helped people make things at home.
Even before the COVID-19 pandemic, Nestlé identified coffee as a focus for renewing its portfolio to focus on categories where it believed it had the greatest growth potential. In one of its biggest moves, Nestlé agreed to pay Starbucks more than $7 billion in 2018 for the rights to sell the Seattle chain’s packaged coffee in grocery stores and other retail outlets. The Swiss company has also invested in smaller brands such as Blue Bottle Coffee and Chameleon Cold-Brew.
For Starbucks, the sale of Seattle’s Best comes as the company plans to focus more on its stores. Last month, interim CEO Howard Schultz unveiled a sweeping overhaul of the coffee chain, ranging from coffee shops to expanded employee benefits.
Nestlé also reported an increase in sales for the first nine months of the year on Wednesday, driven by higher selling prices for its products, which also include KitKat chocolate and Perrier water.
According to the company, organic sales growth in the period was 8.5%, consisting of a 7.5% price increase and a 1% volume increase. The price increase was particularly strong in North America, 11.1%. Total sales during the first nine months of the year rose by 9.2% to 69.13 billion Swiss francs, equivalent to about $69.53 billion.
Companies in the consumer goods industry are struggling with how much to raise prices to offset increased ingredient, transportation, and labour costs while avoiding alienating consumers who are also struggling with high inflation.
Nestlé’s sales figures suggest that buyers are largely willing to pay for its brands. The company said the results are such that full-year sales growth is now expected to be around 8%, compared to a previously forecast range of 7% to 8%.
He anticipates an underlying business margin of around 17 percent. This year, Nestlé said its Purina PetCare product line was the biggest driver of organic growth. The company also cited coffee as the best-performing category, with single-digit sales growth driven by Nescafe, Starbucks, and Nespresso products.