Nestle pays Starbucks $7.1bn to sell its coffee

Nestle has announced that it will pay Starbucks $7.1bn (£5.2bn) to sell the company's coffee products.  The Swiss giant, which boasts Nescafe and Nespresso amongst its brands, will have the right to market Starbucks' coffee in retail outlets outside the cafe chain. That part of the business currently generates $2bn in annual sales. The deal means Nespresso machine owners will be able to buy Starbucks coffee branded pods for use at home.
Consumers will also find Starbucks coffee beans, ground and instant coffee more readily available as Nestle, the world's largest food and drinks company, uses its vast distribution network to market Starbucks products worldwide.
Nestle's name will not appear alongside Starbucks's, but the deal could still help Nestle strengthen its US business, thanks to the powerful High Street coffee brand.  Boil it all down and this is a giant licensing arrangement, whereby Nestle is allowed to sell Starbucks products through Nestle distribution channels.  That means you'll see a lot more Starbucks branded coffee pods for use in Nespresso or Dolce Gusto devices which are all the rage - thanks in part to those George Clooney adverts.
Starbucks will continue to buy the raw (green) coffee beans from farmers but now Nestle will step in and roast and prepare those beans for consumers under strict Starbucks licensing rules. Nestle will not acquire any Starbucks infrastructure nor will any Nestle products appear in Starbucks coffee shops. For that arrangement, Nestle is paying $7bn because it believes Starbucks products will appeal to premium coffee lovers around the world.  Despite the price tag, Nestle shareholders appear to like the deal. Nestle shares rose 1.5% today. While Starbucks investors kind of shrugged.