Quickly Unpacking Nestle’s Majority Investment In Blue Bottle Coffee

Earlier this week, it was reported that Bay Area coffee roaster and coffee icon Blue Bottle received a massive investment from Nestle Corporation, giving it a majority stake in the company and, by some accounts, valuing it at or even above $700M (reports differ here but let’s assume it’s large).

That’s a *lot* of caffeine!

Here are my quick takeaways from the deal (assuming this all converts and an acquisition happens in full). This is one of those posts I write where I will cite and link to a bunch of my previous work on the topic. The posts are short so I’ll just link instead of quoting text:

1/ Retail M&A Is Still Hot: We’ve seen Walmart buy Jet.com for $3B+, Unilever buy Dollar Shave Club for $1B, and most recently, Amazon buy Whole Foods for over $13B. And now we have a big coffee deal in the retail sector and CPG sector, which seems to be the sector that is undergoing the most volatile change right now, one that I dub Climate Change In The Retail Sector.

2/ Frequent Consumer Interactions Are Rare And Therefore Valuable: Consumer attention in the age of iPhones and Instagram is the most finite resource these days. So, when loyal coffee drinkers in urban centers wait for 20 minutes for an individually-brewed cup of coffee, and those drinkers come by once, twice, or even three times per day, the frequency of consumer interactions are likely valued by the acquirer (in this case, Nestle) more than a simple model of forward-looking revenues.

3/ Continual Beverage Consolidation: Every quarter, a favorite microbrewery is scooped up by a larger beverage conglomerate. Something similar has happened in coffee with Intelligentsia and others. Now with Blue Bottle, Nestle has a powerful new channel to expose loyal customers to other brands in its diverse portfolio of over 8,000 brands worldwide. (I was re-reading this post from a number of years ago after Blue Bottle starting raising venture capital in the first place.)

4/ Software And Deep Tech Aren’t The Only Ways To Quickly Create Massive Value: I sort of touched on this in my post on Jet’s acquisition. There’s a tendency among some in tech and startups to look down on tech VCs investing in a consumer coffee company. Nevertheless, respected tech VCs have invested in Blue Bottle (True, Morgan Stanley), Philz Coffee (Summit), Sudden Coffee (Founder Collective & others) and Bulletproof (which received an investment from Trinity, which originally invested in Starbucks over 30 years ago!). It’s another reminder that deep technology and pure software startups aren’t the only company vehicles for creating value and reaching a homerun exit.

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