Nestle to brew high-end coffee with Blue Bottle buy

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Nestle has taken a step to expand its coffee empire with a majority stake purchase in California-based Blue Bottle Coffee. Blue Bottle is well known hipster world of speciality bars that serve high-end, single-origin and cold brewed coffees - a major change from Nestle's usual prepackaged coffee drinks.

The company behind Nescafe instant coffee and Nespresso brewers announced the purchase of a 68 percent - which, according to Reuters's report, is a roughly 425 million US dollar-stake of Blue Bottle on Thursday without disclosing financial terms.

Much like last week’s purchase of Sweet Earth meatless foods, the deal sees the world’s biggest maker of packaged food reaching out to the kind of choosy consumers who are turning away from its mass market brands like Nescafe coffee and Digiorno frozen pizza.

Reuters Photo

This is chief executive Mark Schneider's fourth deal this year. He is an external hire brought in last year to shake up the conservative Swiss company which had missed its sales targets for four consecutive years. Nestle and its multinational peers are fighting slower emerging markets, competition from new brands and a shift in consumer tastes away from processed food.

The company is also selling its US confectionery business, which includes brands like Baby Ruth and Butterfinger, as it seeks to transform itself into a company focused on “nutrition, health and wellness."

Nestle, Europe’s biggest company by market value, is under pressure too from activist shareholder Third Point. The US hedge fund announced a 3.5 billion US dollar stake in June and pressed Nestle for actions such as a margin target and divesting its 23 percent stake in France’s L‘Oreal.

Reuters Photo

The US market for coffee drinks has retail sales of 2.9 billion US dollars, according to Euromonitor International, which forecasts an expansion to 4.4 billion US dollars by 2021.

“Starbucks has for a long time had a virtual lock on this category, but that lead is starting to slip,” said Euromonitor analyst said Matthew Barry.

Blue Bottle, known for its exotic, micro-lot coffees, has minimalist-style coffee bars in the San Francisco Bay Area, Los Angeles, New York and Tokyo. It expects to have 55 locations by the end of 2017, up from 29 last year.

It has raised nearly 121 million US dollars in funding from high-profile investors. Nestle said Blue Bottle would continue to operate as a standalone entity and current management and employees would retain a minority stake.

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Source(s): AP ,Reuters