Nestlé ‘Blue Bottled’ As The Youth Loads Up On Coffee

Nestlé purchased hipster coffee brand Blue Bottle and now industry experts are predicting more acquisitions will follow.

If you’re a coffee addict like I am, you’ve definitely heard of Blue Bottle, one of the newest artisanal coffee brands to emerge in a big way over the last few years. Despite huge conglomerates continuing to dominate the mass coffee market–think Starbucks, Peet’s, and Coffee Bean & Tea Leaf–smaller, niche coffee brands are beginning to take over.

🌸 Other similar acquisitions
⭕JAB Holding Co.
Since 2015, nine coffee deals have been entered into by JAB Holding Co., owned by Europe’s billionaire Reimann family.
⭕Massimo Zanetti
In early September, Massimo Zanetti, an Italian Company bought a majority stake in Indonesian roaster Caswell’s.
⭕Lavazza
Lavazza, in Italy, bought a stake in France’s Espresso Service Proximite, its third acquisition in less than two years.

“There are certainly going to be further purchases at all levels of the price tier,” said Matthew Barry, a beverage analyst at Euromonitor International, adding that any company that is not doing acquisitions in the coffee industry at the moment is seriously falling behind.

Why did Nestlé just spend $700 Million on Blue Bottle?

• Reconnection with the Youth

Nestlé’s few dozen coffee bars are part of the so-called third wave coffee movement in the United States, which emphasizes quality beans and expertly-made drinks.

Analysts feel that under its new chief executive, Nestlé is taking steps to reconnect with consumers, particularly the coffee addicted millennials. It emphasizes the wish to actively work on the portfolio and build on attractive growth areas.

At the national level, however, there is no shift toward independent coffee businesses. Independent coffee houses are largely limited to the urban markets, which contribute a really small share of the revenues.

The small but widely popular players like JAB’s Stumptown and Intelligentsia, Blue Bottle and La Colombe Coffee Roasters – are estimated to generate only $126 million in revenue across 123 stores.

• Big Markup

Nestlé has seen a slug in the last few quarters due to emerging markets, increased competition from these newer brands, changing consumer tastes and increasing disinterest in processed food. Under immense pressure to improve its profits, Nestlé has identified coffee as one of its key priorities for investment. Another trend analyst says,

“There’s a big markup on coffee shop coffees. Put it all together and you’ve got growth and margin, and in some areas, barriers to entry. It’s fragmented so you can consolidate, which usually leads to margins going up.”