Bottles Up: Nestle Bets Big On Hipster Roasted Java, Taking Majority Stake In Blue Bottle

In this April 27, 2015 photo, a barista brews coffee at a Blue Bottle Coffee shop in Tokyo. Japan. (AP Photo/Shuji Kajiyama)

Nestlé is giving itself another jolt of caffeine — this one decidedly more hipster than its other coffee brands. The food and beverage behemoth announced Thursday that it has acquired a majority stake in Blue Bottle Coffee, a high-end specialty coffee roaster and seller based out of California.

Under the terms of the agreement, Nestlé will acquire 68% of Blue Bottle, while Blue Bottle management will hold the remaining 32%. According to the Financial Times, the deal values the coffee upstart north of $700 million. (When reached by Forbes, representatives for Blue Bottle said they could not confirm the valuation or financial details of the acquisition.)

As the owner of Nescafé and Nespresso, Nestlé is already the world’s largest coffee producer in the world, with its java wares available in 180 countries. But in Blue Bottle, Nestlé is getting one of the buzzier brands in the industry. The company was founded in 2002 as a home delivery service focused on roasting the best-sourced beans; today, Blue Bottle has brick-and-mortar shops around the U.S. and Japan, and says it will have 55 locations worldwide by year-end. It also has a line of “premium” ready-to-drink beverages and roast and ground products sold online.

“Blue Bottle Coffee’s passion for quality coffee and mission-based outlook make for a highly successful brand,” Nestlé CEO Mark Schneider said in a statement Thursday. “Their path to scale is clearly defined and benefits from increasing consumer appreciation for delicious and sustainable coffee.”

As for Blue Bottle, which will continue to operate as a stand-alone entity, the deal gives the company access to a network (and financial support) that it hopes will allow it to improve its coffee-roasting technology, expand its footprint, and grow the product line of packaged goods.

“Fifteen years ago I started this company with the goal of roasting, brewing, and selling superlative coffee,” Blue Bottle founder James Freeman said in a statement Thursday. “Nestlé’s belief in our coffee, our process, and, most importantly, our people, assured us that this is a deal that will enable us to dream longer and further into the future than I previously imagined possible.”

Added Blue Bottle CEO Bryan Meehan: “My goal as CEO has been to secure a sustainable future for Blue Bottle Coffee that would enable it to flourish for many years to come. I’m excited to work with Nestlé to take a long-term approach to becoming a global leader in specialty coffee.”

The “long-term approach” was a key part to this deal coming to fruition. In a phone interview with Forbes Thursday afternoon, Meehan said that the company hadn’t started 2017 intending to strike a deal with Nestlé — in fact, they were planning on embarking on a round of financing in the spring. But after meeting with Schneider for coffee at Blue Bottle locations in Brooklyn, Meehan found someone whose vision of the future matched his own.

“We want to work with an investor who’s long term. If you think about it from Blue Bottle’s point of view, we have now one investor we know and love,” he said. Compare this to going public, he continued. In that scenario, Blue Bottle could find itself under fire from “a lot of people we wouldn’t know, like hedge funds who might be focused on transaction comps this quarter [and not] where are you going long term.”

For Blue Bottle devotees who fear the 15-year-old brand might find its culture (and coffee) corrupted by an acquirer that is 151 years old, Meehan has this message: don’t panic.

“My consumers care really, deeply about Blue Bottle. My commitment to those people is that Blue Bottle is going to continue to serve delicious coffee,” he says. “It’s going to maintain its level of hospitality, if not improve on it, and it’s going to continue to be strong and focused on our philosophy around sustainability.”