• by Thom Forbes  @tforbes, September 15, 2017

Oakland-based Blue Bottle coffee, the high-end roaster and café operator launched by a “slightly disaffected freelance musician” in a teeny potting shed in 2002, has sold a majority stake to the Swiss-based multinational conglomerate Nestlé SA for upwards of $425 million.

“Crucially, Blue Bottle will now probably never have to deal with going public in a stock offering, a prospect that appeared to horrify” founder James Freeman, write Michael J. de la Merced and Oliver Strand for the New York Times.

“Everything that I’ve seen and read, it seems like a way of living in hell without dying,” the newly very rich former clarinetist tells them in what has been flagged as the “Quotation of the Day” in the Times’ “Today’s Headlines” email. But some of his customers are apparently not as ecstatic about the deal (reportedly for 68% of the company). 

“I don’t like the fact that a corporate chain has bought a local business that’s supposed to be a community space,” San Francisco resident Amy Whelan tells the San Francisco Chronicle’s Esther Mobley, who “moseyed over to Blue Bottle’s Mint Plaza location in SoMa” when the new broke yesterday.

“‘Another small business gobbled up,’ was Los Altos resident Brian Mellea’s reaction. He shook his head. In terms of consumer loyalty, he said, ‘Nestlé doesn’t have a good track record,’” Whelan relates.

But it’s trying.

“This move underlines Nestlé’s focus on investing in high-growth categories and acting on consumer trends,” Nestlé CEO Mark Schneider says in the press release announcing the deal.

“Like last week’s purchase of Sweet Earth meatless foods, the deal sees the world’s biggest maker of packaged food reaching out to the kind of choosy consumers who are turning away from its mass market brands like Nescafe coffee and Digiorno frozen pizza,” write Reuters’ Martinne Geller and Lisa Baertlein.

“It is the fourth deal this year by new chief executive Mark Schneider, an external hire brought in last year to shake up a conservative Swiss company that had missed its sales targets for four years running. Nestlé and its multinational peers are fighting slower emerging markets, competition from new brands and a shift in consumer tastes away from processed food,” Geller and Baertlein continue.

In contrast, “Blue Bottle sells coffee directly to customers online and operates 40 shops in the U.S. and Japan. This number is expected to grow to 55 by the end of 2017, up from 29 a year earlier, Nestle said Thursday,” Corinne Gretler, Craig Giammona and Olivia Zaleski report for Bloomberg.

“Nestle’s No. 1 position in the global packaged coffee market has been challenged by JAB Holding Co., the investment company of Europe’s billionaire Reimann family, which has spent more than $30 billion expanding its coffee empire with acquisitions including Keurig Green Mountain and Peet’s.” 

Not to mention that other favorite of those of the hipster persuasion, Portland, Ore.-based Stumptown, which was acquired by Peet’s two years ago. 

Freeman, who is now the chief product officer at Blue Bottle, will continue to help run the company with CEO Bryan Meehan, writes Abigail Adams for Time. They will presumably uphold the persnickety standards that have served the company well. 

Blue Bottle’s “stylish, minimalist cafés only serve beans roasted in the previous two weeks, meaning a roastery has to be nearby. The company has also been reluctant to sell its coffee wholesale or franchise out its brand to maintain quality,” write Ralph Atkins and Tim Bradshaw for Financial Times.

Nestlé is “investing in a team, and expertise that we don’t really have,” Patrice Bula, marketing director of Nestlé, tells them.

“Their commitment to us was, ‘We love what you do, we want to help you grow,’” the colorful Freeman tells the NYT’s de la Merced and Strand. “One of the biggest food companies in the world has really voted in favor of very delicious coffee.”

Yeah, but it’s really, really responding to market forces.

“The moves came amid investor pressure to boost profits and raise Nestlé’s share price, which has languished over the past two years. That pressure culminated in late June with the founder of activist investor Third Point LLC, Daniel Loeb, publishing a letter on how Nestlé should change its business. His recommendations included a formal margin target, more share buybacks and a sale of Nestlé’s stake in French cosmetics giant L’Oréal SA,” points out Brian Blackstone in the Wall Street Journal.