Under the deal, Nestle will pay $7.2 billion to market, sell and distribute Starbucks' packaged coffees and teas around the world, the companies said. Instead, chief executive officer Mark Schneider is harnessing the name recognition of Starbucks, with its 28,000 outlets around the globe and massive draw in the U.S. Nestle has struggled there for years with its own products like Nespresso and Dolce Gusto. It comes as Nestle's Nescafe brand of instant coffees has lost market share in four of the past five years, according to Euromonitor.
Starbucks also notes that it already has plans for the after-tax proceeds that it will get from the $7.15 billion deal.
Starbucks will make its first foray into the home of the espresso with the coffee shop chain announcing it will open an Italian branch in September. Starbucks says it will use the cash windfall to speed up its share buy-backs.
Nestle said its ongoing share-buyback program will remain unchanged.
Nestle expects this business to contribute to its profit in 2019.
Other big players are growing as well, including Italy's Lavazza, which is now the world's No. 3.
Starbucks has long farmed out retail distribution of its packaged products, but the partnerships have not always been smooth.
The deal is expected to give Nestle a platform for growth in North America with the stronghold in the premium roast and ground and portioned coffee businesses. Recent purchases include vegan and vegetarian product maker Sweet Earth and a minority stake in Freshly, a company that sells prepared meals directly to USA consumers. It said the deal would add to earnings per share by 2021. Nestle also has joint ventures with General Mills for cereal, Lactalis for dairy products and R&R for ice cream.