Starbucks-Nestle Deal: A Wake-Up Call for the Coffee Industry?

Consumers react to two coffee giants’ new partnership

Many people start their day with a cup of coffee for a much-needed jolt of caffeine. But coffee lovers received another jolt on May 7 when news broke that Nestle will pay $7.15 billion to market, sell, and distribute Starbucks products, even without receiving any physical assets in this deal.

This partnership has shaken up the coffee industry and, from a business standpoint, Nestle stands to benefit. According to an LA Times article, “analysts say it [Nestle] has failed to resonate with younger consumers in the U.S….the company’s flagship coffee brand, Nescafe, is seen as a boring, mass-market brand, while its higher-end Nespresso has failed to garner widespread appeal in the United States.”

Nestle’s need to change public opinion about its coffee is understandable, but what does this partnership mean for consumers? We looked at the social conversation to find out.

Who’s the Java King?

Before getting into the specifics of the deal, let’s compare the online conversation about both brands. Are the two brands comparable competitors? Or does one brand have a significant edge?

The social conversation about Nestle is dwarfed by the social conversation about Starbucks. Since 2010, Nestle’s share of voice never rose above 10 percent. In fact, 2018 is the first year Nestle’s share of voice reached 10 percent. From Jan. 1 to May 9, 2018, Starbucks generated 11.9 million social posts while Nestle generated 1.3 million. With Starbucks dominating the social conversation, Nestle has much to gain with this partnership.

But knowing that Starbucks dominates the conversation is only a starting point; it’s equally important to know how consumers reacted to the announcement itself.

 

How do Consumers Feel About Starbucks and Nestle?

However, far more consumers reacted to the deal negatively. The negativity was driven by consumers who were angry at Starbucks for partnering with what they deem to be an unethical company like Nestle (who has received negative consumer attention for animal testing, child labor, deforestation) and consumers still angry at Starbucks for the racial bias incident at one of its Philadelphia locations.

Who are the Consumers?

Consumers often have negative reactions to large partnerships, but the hope is that this immediate response will transition over time to benefits for both brands. In this case, the companies hope that Starbucks reputation among coffee lovers will create a halo around Nestle, and that Nestle’s broad audience will create growth for the Starbucks brand.

From a business and market standpoint, Starbucks has a lot to gain by permitting Nestle to sell its products. The Starbucks crowd is a far younger one: 43 percent of those discussing Starbucks are under 25 years old. In contrast, that number is 18 percent for Nestle. While only 48 percent of those discussing Starbucks are 35 years old and above, that number is 77 percent for Nestle.

While the Starbucks discussion is dominated by females (62 percent), females make up 52 percent of the Nestle discussion.

Conclusion

By looking at the conversation about the two coffee brands and their deal on social media, we are able to see how consumers react to the partnership and learn about the difference in demographics between the two brands.

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