In the book, THE BLAIR RULES: A STRATEGIC GUIDE TO ORGANIZATIONAL CHANGE MANAGEMENT, I talk about Starbucks and Nestle, but separately.
There’s now an opportunity to talk about Starbucks and Nestle together. And in the spirit of full disclosure – that is, of clear revelations re. “connections,” I should reveal that I’m drinking a cup of hot chocolate as I write this post. (Needless to say, I’m making fun of those in the media who are so “up-tight” about everyone else’s connections, other than their own, of course.) Starbucks‘ plan for its future is to bet on its coffee shops. And with that plan in mind, they are giving up on the purveying of their coffees and teas to shops and supermarkets and, instead, turning that process over to Nestle to shop around those products, a market that generated 1.8 billion in revenue in 2017. SB has dropped ancillary businesses in the past. For example, in Fall, 2017 the company sold its Tazo tea brand to Unilever for $384 million. Thus, it’s not necessarily an unprofitable idea to generate products and then sell them off. Right now SB , is focusing on the success of its U.S. stores rather than products. The company has recently opened high end U.S. stores under the brands of Roastery and Reserve, in order to compete with independent shops and small chains that have recently gained popularity. SB also wants to open more stores in China where it anticipates that the market in that country will surpass that of the U.S. in the coming years. The company recently opened its first Roastery store in Shanghai. The deal with Nestle gives Starbucks an infusion of cash ($7.15 billion) which it plans to return to shareholders through share buybacks and dividends. The current plan is to devote $20 billion to that purpose over the next 3 years. So, America First; but China second. Or, maybe, ultimately, first?
THE ALIGNMENT OF STARS – STARBUCKS AND NESTLE