While Starbucks' 28,000 cafes continue to dominate the world of on-premise coffee, retail sales of products like capsules and beans sold through supermarkets and other grocery retailers have been disappointing. Only about 10 per cent of the coffee company's revenues come from retail sales.
The Swiss giant, on the other hand, is a master at mass marketing and sells most of its brands through wholesale channels into big retailers. Nestle gets the Starbucks brand to complement its own growing coffee business and also gains a brand with significantly more heft in the US where it has traditionally struggled with its existing coffee portfolio.
The tie-up makes sense if one considers management theories - in fact, two of them - core competency and competitive strategy. Add the licensing factor and the deal becomes that much clearer. Read on.