Nestlé on Thursday said it has acquired a majority stake in Oakland-based Blue Bottle Coffee, intensifying the growing battle over pricier, higher-end coffee.
The deal values the fast-growing Blue Bottle chain at $700 million, according to a Financial Times report, and brings another, massive coffee giant into the burgeoning specialty coffee market. Nestlé reportedly bought a 68-percent share of the company.
Blue Bottle has gained a reputation among consumers willing to pay high prices for high-quality coffee — and attracted tens of millions in investment along the way. Blue Bottle is expected to grow to 55 coffee shops in the U.S. and in Japan by the end of the year, from 29 at the end of last year. The company has also launched premium, ready-to-drink coffees, as well as ground coffee products in online and retail shops.
Nestlé, meanwhile, is the biggest coffee producer in the world, with brands such as Nescafé and Nespresso.
“This move underlines Nestlé’s focus on investing in high-growth categories and acting on consumer trends,” Nestlé CEO Mark Schneider said in a statement. “Blue Bottle Coffee’s passion for quality coffee and mission-based outlook make for a highly successful brand. Their path to scale is clearly defined and benefits from increasing consumer appreciation for delicious and sustainable coffee.”
Nestlé said that Blue Bottle would enable the company to strengthen its position in the U.S. coffee market, the world’s largest, as well as internationally.
The deal now pits some of the biggest and best-known coffee companies and investors against one another for the market for coffee connoisseurs willing to pay more than $10 in some cases for a cup of coffee. In 2015, for instance, the coffee- and breakfast-focused investment firm JAB Holding Co. acquired Intelligentsia Coffee and Stumptown Coffee through Peet’s Coffee & Tea.
Starbucks Corp., which is increasingly getting into the higher-end coffee market. The chain has opened upscale shops and its founder, Howard Schultz, stepped down as CEO in part to concentrate on the burgeoning, high-end coffee business.
Investors have poured money into Blue Bottle, which has received at least $120 million in investment dollars in recent years.
Nestlé said that Blue Bottle will continue to operate as a stand-alone entity. Current management and employees will retain a minority stake and will run the business. That includes Bryan Meehan, the CEO, and founder James Freeman, the chain’s chief product officer.
“My goal as CEO has been to secure a sustainable future for Blue Bottle Coffee that would enable it to flourish for many years to come,” Meehan said in a statement. “I’m excited to work with Nestlé to take a long-term approach to becoming a global leader in specialty coffee. We felt a real kinship wit the team and knew it was the right move for us."
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