Starbucks to Sell Seattle's Best Brand to Nestle; No Change to Exemplary Capital Allocation or FVE

Wide-moat Starbucks announced its intention to sell its Seattle's Best Coffee brand to wide-moat global giant Nestle, a move that makes strategic sense but carries very little in the way of financial ramifications. The brand was acquired in 2003 and generated just shy of $100 million in global sales in 2021, according to Euromonitor—a bit less than 30 basis points of consolidated Starbucks' net revenue and modestly behind its turnover in 2016 ($111 million). Similar consumer food and beverage deals over the past five years have yielded deal multiples in the neighborhood of 2-3 times sales, suggesting that the consideration paid will be financially immaterial for the global coffee chain. We plan to maintain our $104 fair value estimate and Exemplary capital allocation rating for Starbucks and believe management's decision to focus on the core retail business is strategically cogent.