Nestle will pay up to $500 million for a 68 percent stake in the Oakland, California-based company, according to a person familiar with the matter who asked not to be identified because the details haven’t been made public. Blue Bottle sells coffee directly to customers online and operates 40 shops in the U.S. and Japan. This number is expected to grow to 55 by the end of 2017, up from 29 a year earlier, Nestle said Thursday.
Nestle’s No. 1 position in the global packaged coffee market has been challenged by JAB Holding Co., the investment company of Europe’s billionaire Reimann family, which has spent more than $30 billion expanding its coffee empire with acquisitions including Keurig Green Mountain and Peet’s.
Nestle Chief Executive Officer Mark Schneider has singled out java as one of the Swiss company’s biggest growth opportunities, with a focus on expanding sales in the U.S., which is the world’s largest coffee market. Nestle sells Nespresso machines in the U.S., but still trails Keurig in that category.
“This move underlines Nestle’s focus on investing in high-growth categories and acting on consumer trends,” Schneider said in a statement.
The food and beverage giant is also eager to expand its presence in U.S. retail stores. Blue Bottle produces a ready-to-drink cold brew product that is sold in some Whole Foods stores and is working to get its packaged coffee into the upscale organic grocery chain, which was recently acquired by Amazon.com Inc.
The company is working to maintain its freshness standards as it seeks to expand its retail presence and could be available nationwide at Whole Foods stores next year, according to CEO Bryan Meehan.
“They invested because they think we’re onto something,” he said in an interview following the announcement.
Meehan and Schneider started talking about a partnership during a February meeting in Brooklyn, where Blue Bottle had just opened a massive cafe and production facility. The deal is structured to keep the coffee startup as a stand-alone entity, and Meehan said he’s not concerned that selling a majority stake to a global food giant will erode the buzz his band has created.
“When people see this happening they feel like things are going to get worse,” Meehan said. “I’m not going to allow that to happen.”
In addition, the deal means that Blue Bottle is insulated from the pressure that surrounds prominent venture-backed startups with lofty valuations — not to mention public companies.
“The public markets are a distraction,” he said. “I don’t want to be part of that conversation — companies like Blue Bottle should never go public.”