GLOBAL April 2020
Nestle, Starbucks see tremendous growth in its global coffee alliance
Two global coffee giants, Nestle and Starbucks expect their global alliance in developing new products and growing into new markets to boost their revenues in the long term.
The alliance, set up in mid-2018 saw Nestle paying US$7.15 billion for the rights to sell Starbucks packaged coffees/teas, thereby freeing Starbucks to focus on its food services business.
With the alliance, Nestle will be better able to handle stiff competition from rivals like JAB Holdings. Nestle head of coffee brands David Rennie said, “We will be in 50 markets by the end of the 1st quarter 2020.”
Nestle has developed a range of new products, including Starbucks-branded capsules for its Nespresso and Dolce Gusto single-serve coffee brewers, available in more than 40 markets at the end of 2019. The company is also introducing Starbucks premium soluble coffee globally, starting in over a dozen markets including the UK, China, Japan, Brazil and Mexico.
Rennie said the soluble coffee segment is growing very fast in China, but Japan, Australia, Malaysia, Singapore and the UK are also big potential markets for its new products.
Nestle generated sales of US$300 million with new products launched last year, on top of the US$2 billion business in North America that it acquired from Starbucks.
According to Nestle, its coffee business recorded sales revenue of US$18 billion in 2019, which was roughly 20% of the group overall sales.
In China, despite the ongoing coronavirus outbreak, Nestle has seen an increase in online orders as Chinese consumers stayed at home. In recent months, Starbucks and other fast-food companies have also ramped up contactless pickup and delivery services in China to keep the virus from spreading.



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