An Unholy ($7bn) Alliance

11 May 2018  |  John Lowery 
An Unholy ($7bn) Alliance

Inconsistent PR statements translate into troubling reputations, writes John Lowery

It was announced last weekend that Nestlé is paying Starbucks $7.15bn for the rights to sell its products in a global alliance.

If you got beyond the headline you’d have come across a Nestlé source stating that, following the deal, its name would not appear on the Starbucks products because, “We do not want the consumer to perceive that Starbucks is now part of a bigger family.”

What?

There were articles about the merger on the BBC, Bloomberg, CNBC, Reuters and in The Times, The Guardian, The Telegraph, The Washington Post, The Times of India and now Mediatel’s Newsline.

I think it’s safe to say that one or two consumers “perceive that Starbucks is now part of a bigger family”.

Moreover, Nestlé spokesperson, can I alert you to the fact that there’s a thing called the internet? And on it people can find out stuff about companies, like the fact that it’s bought the rights to flog Starbucks products.

The public announcements take on an even more extraordinary turn when you read Starbucks’ CEO, Kevin Johnson’s comment: “This global coffee alliance will bring the Starbucks experience to the homes of millions more around the world through the reach and reputation of Nestlé.”

I’m all over the shop now.

There’s someone at Nestlé who’s apparently never heard of the internet and thinks being part of their ‘family’ would be embarrassing for Starbucks and someone at Starbucks who is lauding the ‘reputation’ of Nestlé.

You’d think, with 7 billion on the table, the two PR departments would have found some time for a chat, during which they could have aligned their stories.

But then that chat might have been a little troubling.

On one side of the table, groaning with cash, would be the Starbucks’ PR, proud of their excellent reputation for selling ‘grande, demi-caf, half-sweet, no-whip, coconut milk, cinnamon dolce latte with agave and no topping coffees’ but somewhat more uncomfortable about their reputation for the ‘grande, not-so-sweet, mostly-skipping of responsible tax payments corporate policy’.

If the Nestlé PR, sitting on the other side of the table, had typed ‘Starbucks + tax’ into the internet thingy, they’d have been bombarded with links including one to ethicalconsumer.com. Here’s their perspective on Starbucks :

While they were having a look around the internet they might have stumbled upon some unfortunate stuff about their own company’s reputation: mixed when it comes to Herta frankfurters, Tooty Fruities and Strawberry Flavoured Nesquik but really quite worrying when comes to its promotion of formula milk in the developing world.

Nestlé has been subject to the longest consumer boycott in history and it’s plainly making huge strides on that front, because here’s an extract from The Guardian in February:

“The Swiss multinational Nestlé has been accused of violating ethical marketing codes and manipulating customers with misleading nutritional claims about its baby milk formulas.

“A new report by the Changing Markets Foundation has found that Nestlé marketed its infant milk formulas as ‘closest to’, ‘inspired by’ and ‘following the example of’ human breastmilk in several countries, despite a prohibition by the UN’s World Health Organisation.”

No wonder there was some confusion when it came to issuing consistent statements.

So, what is actually going on? Here are my guesses:

Starbucks sales growth has been slowing, especially in the States and, according to the FT, its ‘outlook is uncertain’. The deal gives it a pile of cash, with which it can boost its share price through a buyback programme, but it also affords new distribution opportunities via Nestlé’s muscle.

Nestlé was number 1 in coffee before this deal but I suspect it’s afraid of the tectonic shifts taking place in grocery, and is keen to build its lead such that it can strengthen its position as ‘category captain’ and, of course, stand toe-to-toe with the new bruiser on the block - a bruiser that is also less than forthcoming when it comes to the payment of tax - Amazon.

How unseemly this all is.

The alliance will surely be good for sales but I think it will be a while before the PR folk can issue consistent and convincing stories.



John Lowery is a marketing consultant who has worked both agency and client side

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17 Aug 2018 

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