Economy

Nestle Pays $7.15b to Market Starbucks Products

Published

8 years ago

14/05/2018

By Modupe Gbadeyanka

A licensing deal worth $7.15 billion has been sealed between Nestle and Starbucks Corporation, allowing Nestle have the perpetual right to market Starbucks’ consumer and foodservice products globally outside of Starbucks coffee shops, which are not part of the transaction.

“This transaction is a significant step for our coffee business, Nestlé’s largest high-growth category,” said Mr Mark Schneider, CEO, Nestlé.

“With Starbucks, Nescafé and Nespresso we bring together three iconic brands in the world of coffee.

“We are delighted to have Starbucks as our partner. Both companies have true passion for outstanding coffee and are proud to be recognized as global leaders for their responsible and sustainable coffee sourcing. This is a great day for coffee lovers around the world,” he added.

“This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé,” President and CEO of Starbucks, Mr Kevin Johnson, stated.

“This historic deal is part of our ongoing efforts to focus and evolve our business to meet the changing consumer needs, and we are proud to work alongside a company that is committed to our shared values,” he added.

Business Post reports that the two companies will work closely together on innovation and go-to-market strategies to bring the best coffee to customers around the world as the deal allows Nestlé to capture exciting new growth opportunities in the rest of the world with Starbucks premium products. As a complete provider of coffee solutions, Nestlé will accelerate growth in out-of-home channels.

However, the agreement is subject to customary regulatory approval and is expected to close by the end of 2018. The agreement excludes Ready-to-Drink products and all sales of any products within Starbucks coffee shops.

As part of this transaction, Starbucks will receive an up-front cash payment of $7.15 billion for a business which generated annual sales of $2 billion.

But the transaction does not include the transfer of any fixed assets, which facilitates a smooth and efficient integration and Nestlé expects this business to contribute positively to its earnings per share and organic growth targets as from 2019.

Nestlé’s ongoing share-buyback program will remain unchanged, the management said, but approximately 500 Starbucks employees will join the Nestlé family to drive performance of the existing business and global expansion. Operations will continue to be located in Seattle.

Meanwhile, notable credit rating company, Moody’s, has rated the Nestlé’s Starbucks deal as “credit negative,” changing its outlook on Nestlé’s Aa2 rating to negative from stable.

It noted that the deal will be fully funded with debt, increasing Nestlè’s reported gross debt by approximately 20 percent.

Moody’s said because Nestle confirmed that its ongoing CHF20 billion share buyback to be completed by 2020 will not be amended following the transaction, the firm’s credit metrics, which are already weak for its current Aa2 rating, will deteriorate.

“We expect Nestlé’s ratio of retained cash flow to net debt to drop to below 20% in 2019 and 2020 from 29 percent in 2017, which is below our 30 percent quantitative guidance for its Aa2 rating, and its ratio of funds from operations to net debt to decline to 36 percent -40 percent from around 56 percent,” Moody’s said in its report obtained by Business Post.

However, Moody’s said in spite of the negative credit implications, the agreement is positive from an industrial standpoint because it will reinforce Nestlé’s position in the coffee segment, which is growing faster and with higher profitability than the group’s average.

In 2017, Nestlé’s powdered and liquid beverage division, which includes coffee, grew by 3.6 percent compared with the group’s consolidated organic sales growth of 2.4 percent and the division’s underlying trading operating margin was 21.9 percent compared with a consolidated 16.4 percent.

The Starbucks’ business included in the agreement generated approximately $2.0 billion of revenue in 2017 and Nestlé could rapidly expand it, especially outside the US given its global distribution platform.

Moreover, the deal does not entail any fixed-asset transfer, which should limit execution risk and reduce integration costs.

The agreement is consistent with Nestlè’s strategy to reach mid-single-digit organic sales growth in 2020 and improve its underlying operating margin to 17.5 percent -18.5 percent by 2020 from 16 percent in 2016, reflecting accelerating organic sales growth via product innovation and renovation; a CHF2.0-CHF2.5 billion cost-savings programme; and the adjustment of the group’s product portfolio by disposing of low-growth, low margin segments and by investing in more attractive ones. Recent transactions include the disposal of the US confectionery business for $2.8 billion in January 2018, the acquisition of Canadian nutritional company Atrium for $2.3 billion in December 2017 and the purchase of a 68 percent stake in premium coffee retailer Blue Bottle Coffee in September 2017. The company is also considering the disposal of Gerber’s life insurance business.

Economy

NASD Exchange Extends Bearish Run After 0.56% Drop

Published

1 day ago

03/04/2026

Adedapo Adesanya

By Adedapo Adesanya

The NASD Over-the-Counter (OTC) Securities Exchange extended its stay in the south territory with a decline of 0.56 per cent on Wednesday, April 2.

This brought down the market capitalisation by N13 billion to N2.417 trillion from N2.430 trillion, and downed the NASD Unlisted Security Index (NSI) by 22.57 points to 4,062.87 points from the previous session’s 4,062.87 points.

It was observed that the NASD exchange ended with three price gainers and three price losers during the trading day.

MRS Oil Plc depreciated by N19.00 to close at N171.00 per unit compared with the previous price of N190.00 per unit, NASD Plc lost N4.14 to trade at N37.36 per share compared with Wednesday’s N41.50 per share, and Central Securities Clearing System (CSCS) Plc gave up N2.00 to sell at N78.00 per unit versus N80.00 per unit.

On the flip side, FrieslandCampina Wamco Nigeria Plc appreciated by 19 Kobo to N93.00 per share from N92.81 per share, Food Concepts Plc expanded by 15 Kobo to N2.87 per unit from N2.72 per unit, and Great Nigeria Insurance (GNI) Plc improved by 2 Kobo to 52 Kobo per share from 50 Kobo per share.

Yesterday, the volume of securities dipped by 91.8 per cent to 260.2 million units from 3.2 billion units, the value of securities went down by 98.1 per cent to N154.2 million from N8.3 billion, while the number of deals soared by 53.3 per cent to 46 deals from 30 deals.

GNI Plc was the most active stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by CSCS Plc with 56.9 million units valued at N3.9 billion, and Okitipupa Plc with 27.5 million units traded for N1.8 billion.

The most traded stock by volume on a year-to-date basis was also GNI Plc with 3.4 billion units sold for N8.2 billion, trailed by Resourcery Plc with 1.1 billion units exchanged for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units transacted for N1.2 billion.

Economy

Naira Slips to N1,380/$1 at Official Market, Remains N1,405/$1 at Black Market

Published

1 day ago

03/04/2026

Adedapo Adesanya

By Adedapo Adesanya

The Naira dropped N2.09 or 0.15 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Thursday, April 2, to trade at N1,380.79/$1 compared with Wednesday’s rate of N1,378.70/$1.

However, it appreciated against the Pound Sterling in the official market by N2.77 to quote at N1,824.86/£1 versus the N1,836.57/£1 it was traded at midweek, and improved its value against the Euro by N10.54 to N1,591.92/€1 from N1,602.46/€1.

Yesterday was the last trading session of the week for the local currency in the spot market, as the market will be closed on Friday and Monday for the Easter Holiday.

At the black market, the Nigerian Naira maintained stability against the greenback yesterday at N1,405/$1, but gained N8 at the GTBank FX counter to settle at N1,388/$1, in contrast to the previous session’s N1,396/$1.

Pressure eased on the domestic currency as strong policy indicators have helped calm the majority of worries within the financial systems. Particularly in the remittance segment, the apex bank has directed all International Money Transfer Operators (IMTOs) to route remittance transactions through designated Naira settlement accounts in banks, a move aimed at boosting transparency and channelling more foreign exchange into the formal market.

This helps take off pressure from the foreign reserves, which have fallen below the $50 billion mark as they are gradually decreasing rather than falling sharply.

Meanwhile, the cryptocurrency market was bullish on Thursday, as macro sentiment shifted against recent optimism after reports that Iran is drafting a protocol with Oman to manage traffic through the Strait of Hormuz, easing concerns about disruptions to a key global oil route.

The remarks came after U.S. President Trump on Wednesday night vowed to hit Iran “extremely hard” in the coming weeks and that the Strait of Hormuz would “open naturally” once the war ends.

Cardano (ADA) chalked up 1.9 per cent to trade at $0.2435, Dogecoin (DOGE) grew by 1.2 per cent to $0.0912, Ethereum (ETH) appreciated by 0.8 per cent to $2,066.37, Bitcoin (BTC) added 0.5 per cent to sell at $67,080.53, Solana (SOL) increased by 0.5 per cent to $79.91, and Ripple (XRP) jumped 0.2 per cent to $1.31.

Conversely, Binance Coin (BNB) dipped 0.7 per cent to $586.90, and TRON (TRX) depreciated by 0.3 per cent to $0.3147, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) closed flat at $1.00 each.

Economy

Bulls, Bears Share Customs Street’s Spoils Amid Bullish Investor Sentiment

Published

1 day ago

03/04/2026

Dipo Olowookere

By Dipo Olowookere

The local stock market was relatively flat on Friday, as the bears and the bulls shared the spoils of war, though investor sentiment turned bullish compared with the preceding session’s bearish posture.

Data from the Nigerian Exchange (NGX) Limited showed that the All-Share Index (ASI) was marginally down by 4.66 points as it ended at 201,698.89 points versus Wednesday’s 201,703.55 points, and the market capitalisation slightly contracted by N3 billion to N129.806 trillion from N129.809 trillion.

Customs Street was shut on Friday because of the public holidays declared by the federal government today and next Monday.

Business Post reports that John Holt declined by 9.91 per cent to N15.45, Abbey Mortgage Bank shed 9.60 per cent to trade at N8.95, International Energy Insurance slipped by 6.48 per cent to N3.32, Chams shrank by 5.30 per cent to N3.75, and Tantalizers depreciated by 5.18 per cent to N4.03.

On the flip side, Unilever Nigeria improved by 10.00 per cent to N103.40, Fortis Global Insurance gained 9.82 per cent to trade at N1.23, Multiverse appreciated 9.81 per cent to N20.15, Legend Internet advanced by 9.38 per cent to N6.30, and Zichis grew by 9.02 per cent to N14.14.

The market breadth index was positive during the trading session, as there were 35 appreciating stocks and 24 depreciating stocks.

Yesterday, investors traded 560.0 million equities valued at N19.3 billion in 49,676 deals, in contrast to the 815.5 million equities worth N33.3 billion transacted in 52,641 deals in the preceding day, representing a drop in the trading volume, value, and number of deals by 31.33 per cent, 42.04 per cent, and 5.63 per cent, respectively.

Secure Electronic Technology dominated the activity log with 59.7 million shares valued at N61.1 million, Wema Bank exchanged 52.0 million equities worth N1.4 billion, VFD Group transacted 36.0 million stocks for N410.5 million, Access Holdings sold 35.3 million shares valued at N914.8 million, and Chams traded 31.0 million equities worth N115.0 million.