Nestle just spent up to $500 million on a major step to fix its reputation
On Thursday, news broke that the $259 billion Swiss company had bought a majority stake in Blue Bottle Coffee, a hip chain and roastery that's a favorite with the Silicon Valley crowd. The acquisition - which reportedly cost Nestlé up to $500 million - is a major departure for a company best known for instant coffee, bottled water, and chocolate bars.
However, something completely different is what Nestlé needs right now.
"At a corporate level, Nestlé is trying to become a company more focused on healthier food products," Matthew Barry, beverage analyst at market research firm Euromonitor, said in an email Thursday.
While Nestlé owns brands as diverse as Gerber baby food, Perrier, DiGiorno, and Hot Pockets, many people still immediately associate the company with candy. And, the company is trying to shake that reputation in favor of a more health-centric strategy.
Many of the company's most well-known brands are sugary confections like Butterfinger, Nerds, and Laffy Taffy. As global backlash against sugar grows, Nestlé needs to be known for more than its sweets.
Then, there's the issue of bottled water - another product that has gotten Nestlé into trouble recently. Environmental activists in Michigan, Oregon, and Canada have called for boycotts against Nestlé after the company allegedly bottled water from sources in a manner that was a detriment to the well-being of local communities.
Online reaction to the deal shows that many are still calling for Nestlé boycotts:
While Nestlé maintains that it works with local communities in areas where it sources water, the company's reputation could benefit from the addition of a hip, well-respected brand.
Enter Blue Bottle.
"The fact that they would spend so much money buying Blue Bottle at a time they are thought to be trying to shed some of their unhealthier brands, such as their confectionary products, shows that they think coffee is an important part of that shift," Barry said.
There is a concern that, instead of the acquisition boosting Nestlé's reputation, it could simply damage Blue Bottle's own image. However, with Blue Bottle continuing to function as a stand-alone brand, Barry says that it should be able to continue to thrive as long as it maintains its quality and sense of independence.
"You can't run your business by worrying what people will think," Blue Bottle CEO Bryan Meehan told Business Insider. "You have to run your business by believing in what you do. And, I know how things will be in the future - our customers don't."