Susquehanna digs into the Starbucks-Nestle deal

|About: Nestle S.A. ADR (NSRGY)|By:, SA News Editor

Susquehanna analyst Pablo Zuanic explains how the Starbucks (NASDAQ:SBUX)-Nestle (OTCPK:NSRGY) deal changes the landscape.

"SBUX CPG has limited presence overseas, so the Nestle network will enable growth in single serve pods (Nespresso and Nescafe Dolce Gusto SS platforms). Despite minor inroads, the SBUX CPG business overseas is practically non-existent," he notes.

"Although in principle this does not change things dramatically in the US, one would think the Nestle clout (it is the largest food company in the US in terms of U sales), could give SBUX CPG more clout (we note SBUX channel development sales in FY17 “slowed” to 4% from 10%)," he adds.

Zuanic and team think it's unclear if the transaction signals a larger long-term alliance between Nestle and KGM, although they observe that it may be a way for both to respond to the growing profile of JAB Holdings.

Previously: Nestle, Starbucks enter $7.2B coffee alliance (May 7)

Shares of Starbucks are up 3.33% premarket to $59.60.