Nestle acquires Blue Bottle to challenge Starbucks dominance

US-based Blue Bottle, established in 2002, has built its reputation on hand-drip premium coffee which costs more than US$10 a cup. Itís a favorite of Silicon Valley professionals, who have dubbed it "the iPhone of the coffee industry". With less than 40 stores, the boutique coffee chain has reportedly sold a controlling stake to Swiss food and beverage giant Nestle for around US$500 million.
James Freeman founded Blue Bottle Coffee and the name was inspired by Europeís first coffee shop, the Blue Bottle Coffee House, which was established in Vienna in 1686. The company has expanded very slowly over the years, partly due to its uncompromising attention to taste, freshness and sustainability which became the hallmarks of the company.
Regarded as a leading brand in the evolving coffee culture in the US, which places a lot of emphasis on the origin of coffee beans as well as the brewing and dripping process, Blue Coffee has attracted reputable investors such as Google Ventures, Morgan Stanley, and the founders of Twitter, Instagram and Uber.
Although it is much smaller than Starbucks, Blue Bottle Coffee can be a nice fit with Nestle, as the food giant can use the company to launch high-end coffee products and coffee machines to challenge Starbucks in those important market segments.
Nestle sales stood at US$93 billion last year, of which US$15 billion was generated by its coffee business including instant coffee and Nespresso coffee machines. Both products have dominated the entry-level coffee market.
Freeman will stay as Blue Bottle's Chief Product Officer after the deal, and he promised to preserve the core spirit and culture of the company, however he will not be involved in the operation and expansion of the business.