Nestle, Starbucks Ink $7.15 billion Coffee Licensing Tie-Up
Nestle, the world's biggest food and beverage firm, has struck $71.5 billion cash deal with Starbucks Corp. for exclusive rights to sell the coffee chain's packaged coffees and teas globally.
The deal announced on Monday could boost Starbucks' business selling packaged Starbucks coffee, Teavana tea and other products via grocery stores and other retailers.
The partnership, which quantifies to a licensing deal, makes it possible for Starbucks to focus on enhancing its mainstay U.S. cafe business, where traffic growth has flattened amid competition from fast-food chains and upscale coffee houses, while rapidly expanding shops in China.
Starbucks will use the money raised from the deal to boost planned stock buybacks to $20 billion from $15 billion through fiscal 2020. It said the agreement would add to earnings per share by 2021.
The agreement also includes Starbucks-branded capsules for Nestle's Nespresso and Dolce Gusto single-serve brewers, which should help Nestle limit sales of alternatives from other providers.
Nestle anticipates the partnership will add to its earnings by 2019. It did not announce changes to its buyback plans.
Aside from cash payment, Starbucks will get revenue from product sales and royalties.
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