Nestlé and Starbucks tie-up heads to China

Boxes of Nespresso coffee pods are pictured in the supermarket at Nestlé’s headquarters in Vevey, Switzerland. Picture: REUTERS
Boxes of Nespresso coffee pods are pictured in the supermarket at Nestlé’s headquarters in Vevey, Switzerland. Picture: REUTERS

Nestlé plans to introduce its first range of Starbucks-branded products in China, as part of a global tie-up that will help bolster the Swiss company’s proprietary Nespresso capsules in one of its fastest-growing markets.

The two companies will sell 21 products from the Starbucks At Home line, including whole bean and ground packaged coffees as well as Starbucks capsules created using the Nespresso and Nescafe Dolce Gusto systems, they said in a statement on Thursday.

The line, available on e-commerce platforms and in grocery stores, will help Starbucks diversify its presence in China beyond cafes at a time when it is facing growing competition from local challengers such as Luckin Coffee.

The product range is part of a global alliance announced in 2018 under which Nestlé paid $7.15bn for the right to market Starbucks’s products, as it sought ways to rejuvenate its Nespresso capsule business — once its biggest growth motor — and fend off copycats.

It also means an additional income source for Starbucks in China, a traditionally tea-drinking nation that’s become the second-biggest contributor to its revenue.

The Seattle-based coffee giant has plans to more than triple its revenue in China by opening a new store every 15 hours through 2022. Starbucks dominates China’s cafe segment with more than 50% market share, while Nestlé leads the local ready-to-drink coffee market.

China is becoming increasingly important for coffee retailers due to its low per-capita consumption of the beverage and rising middle-class affluence.

“This is only the beginning — the addressable market for coffee in China is large and growing,” said Belinda Wong, CEO of Starbucks China, in the statement.

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