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Consolidation over coffee: Why the blending of Blue Bottle and Nestlé is a good idea

Sophie Maxwell, Futures Director

Hot on the heels of the Amazon’s acquisition of Whole Foods, the news that Nestlé has bought specialist coffee firm Blue Bottle Coffee is the latest high profile acquisition under the media spotlight. The burn of consumer criticism is rooted in the feeling that this small and sustainable brand has sold out to a large corporate whose ethics have previously been brought into question, which will in turn alter the brand’s ideology and approach. We would counter, however, that this acquisition is a wholly positive move for both parties as they consolidate their brand – and market – strengths.

There is no escaping the fact that any acquisition is primarily about financial investment but, unlike acquisitions of the past, brands are no longer selling their souls for a stake. We’re increasingly seeing brand investees retaining control in today’s acquisition deals, and Blue Bottle Coffee is no exception: founder James Freeman has confirmed that the company will continue to operate in a stand-alone capacity and that the deal in fact affords the team freedom to focus once again on the art of making coffee, instead of trying to expand its investor base.

Speaking on food blog Grub Street, James clarified Blue Bottle’s approach to this venture, by saying, “My thinking is: we’re the vector and Nestlé’s the host.”

Having grown from a one-man coffee-roasting operation in a converted potting shed to the leader of America’s artisanal, ready-to-drink coffee space, Blue Bottle has placed quality over quantity since day one. Guided by the promise of “only selling coffee less than 48 hours out of the roaster,” the brand never sought to become the next Starbucks, striving instead to forge connections with local suppliers and deliver exemplary customer experiences.

This is where Nestlé as the host needs to be sure to unlearn what it knows: instead of reverting to its default setting as leader, or applying that expertise only where necessary, Nestlé should let Blue Bottle continue to do what made them desirable to Nestlé in the first place: grow at their own pace and on their own terms. The definition of an ambitious, authentic challenger brand, Blue Bottle is on a positive trajectory towards becoming an icon: instead of accelerating that journey, Nestlé’s investment and stewardship should serve only to enrich it.

The acquisition of SoulCycle by Equinox is a case in point. Apart from hitting the headlines, mainly due to, as with Whole Foods, the cost of the sale, there was no negative outcry at this news, simply because it was a massively successful, celebrity endorsed, venture and Equinox stood back and let the brand continue to do more of the same.

Soul was left alone to thrive as an independent brand getting the support of world class strategic partners.” – Melanie Whelan, CEO SoulCycle.

If big brands can give challenger brands the freedom to thrive, refraining from crushing the values and qualities that made them desirable in the first place, both parties will ultimately reap the rewards. It’s about recognising that you wanted them in your fold because they were doing something right, progressive and definitive – and allowing them to keep doing it, for you.

For Blue Bottle Coffee – as it was for Ben & Jerry’s & Unilever, Green & Black’s & Cadbury and other forward-thinking, category-defining challengers – it’s about being able to take the brand to the next stage in its journey from challenger to icon, smoothing new products to market or accelerating expansion with the infrastructure, support and stewardship of a large corporate. Imperatively though, acquisition today is about so much more than financial investment: it has to be much more of an equal and reciprocal process and partnership, based on investment in ideas, in values, in principles.

This was, in fact, the crux of the Amazon Wholefoods merger, where Amazon bought into the core qualities that it needed but couldn’t hope to obtain. The same was true of Cadbury’s acquisition of Green & Black’s, which helped the brand challenge and gain credibility in the elevated space it had created when it introduced premium chocolate to the mass market. Cadbury had tried and failed to compete, in the end acquiring the competition. It had a further halo effect when, within a couple of years of Green & Blacks joining the Cadbury stable, Cadbury Dairy Milk itself adopted a fairtrade approach. So whilst the shift may not be entirely linked to the acquisition, such acquired values inevitably start to infiltrate and rub off on other parts of the organisation. And, indeed, one of the greatest opportunities afforded by the nature of today’s more holistic acquisitions is that of cross-pollination. There are things to be learned and gained on both sides and both parties in this instance are openly acknowledging the issues, learnings and benefits.

Which brings us back to the issue of ethics. Indeed, there have been well publicised issues related to Nestlé’s portfolio in the past. But Nestlé should get credit for now taking bold and strident steps toward creating change and its evolving ethos. Under a new CEO dedicated to sustainability and with a much-publicised commitment to repositioning the company as a ‘health and wellness’ brand, this investment must be seen as the brand’s commitment to improvement in sustainability and the development of a more ethical practice and portfolio.

Blue Bottle represents a tactical addition to the Nestlé portfolio in more ways than one. Whilst Nestlé has changed the culture of how we make and drink coffee at home with Nespresso, it has yet to corner the phenomenally successful craft sector of the market. The acquisition comes at a time of consolidation in the specialist coffee market, with Nestlé openly and actively looking to grow its portfolio in this area. It may be tactical but this alliance brings important validation to its global domination of the coffee industry, as echoed by Blue Bottle Coffee’s CEO, Bryan Meehan, “I’m excited to work with Nestlé to take a long-term approach to becoming a global leader in specialty coffee.” (Source: The Guardian)

Ultimately these new alliances need to be seen as brands on a journey from challenger to icon, and not a done deal. They execute the coffee experience in such different ways – from fast release of a capsule to the careful slow release of a carefully drip brewed coffee – and as they come together for the long haul, the journey should be expected to come with inevitable twists and turns.

“With Ben & Jerry’s and Unilever, not unlike any relationship, there is ongoing work that must occur.” – Sean Greenwood, Ben & Jerry’s.

If both parties are clear, and not contradictory, about their positioning, reasons and aims, consumers shouldn’t be up in arms. This dynamic and future-focused brand consolidation is playing to the strengths of both parties, openly challenging just what they can change and achieve – and is hopefully one in a long line of anticipated brand partnerships, signalling an exciting future for brands in an increasingly collaborative economy.

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