ETFs React to Nestle and Starbucks Joining Forces

Nestle partners with Starbucks to market coffee products globally

Its Nescafe and Nespresso don't carry anywhere near the heft in America that the Starbucks brand does, with its $2 billion in annual sales.

The world's largest packaged food producer won't get any fixed assets in the deal, but expects Starbucks' name recognition both in the USA and across the globe to expand its market share. It's now adding Starbucks coffee and tea products to the list.

The multibillion-dollar Swiss food and beverage company - which owns Nespresso, Nescafé, Kit Kat, Smarties, and more - will pay Starbucks $7.15 billion for rights to sell the Seattle-based coffee chain's products around the world.

Nestle's ongoing share-buyback program will remain unchanged.

Schneider said that the "global coffee alliance" with Starbucks was "a great day for coffee lovers around the world", adding, "With Starbucks, Nescafe and Nespresso, we bring together three iconic brands in the world of coffee".

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Nestle won't get any physical assets in the deal.

The deal still needs approval from regulators and is expected to be finalized in summer or early fall this year, the companies said.

The deal will allow the company to mend the knockoff capsules business, which has been dented for years.

About 500 Starbucks employees would join Nestle and operations would continue to be located in Seattle. "Starbucks is the only strong brand in roast-and-ground". It comes as Nestle's Nescafe brand of instant coffees has lost market share in four of the past five years, according to Euromonitor. Sales are to be booked by Nestle, which is to pay royalties to Starbucks. Nestle also added niche brand Chameleon Cold-Brew past year to expand its portfolio in the U.S. Starbucks' chief financial officer called the valuation "very, very compelling".

Nestle a year ago also added niche brand Chameleon Cold-Brew to expand its portfolio in the US.

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