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Nestle acquires third-wave roaster Blue Bottle

Nestle is muscling its way onto Starbucks' turf through the purchase of a controlling interest in Blue Bottle Coffee, the operator of 34 so-called third-wave cafes.

Blue Bottle management retains 32% of the operation and all shops will run with current management, according to specifics of the deal announced late Thursday.

“Blue Bottle Coffee will continue to operate as a stand-alone entity, while having full access to Nestle’s well-recognized capabilities in coffee and its strong global consumer reach,” according to a Nestle press release announcing the arrangement. “The current management and employees will retain a minority stake and continue to run the business with the same entrepreneurial spirit that has made the brand so successful.”

Nestle did not disclose how much it paid for Blue Bottle, but Financial Times reports the company paid more than $500 million for the acquisition.

James Freeman, a former freelance clarinetist, opened his first Blue Bottle kiosk in 2005. In the years since, the minimalist cafe concept—no Wi-Fi, limited coffee menu, sparse decor—has raised $120 million from investors.

Blue Bottle, which had 29 units in the U.S. and Japan at the end of 2016, is expected to grow to 55 locations by year’s end. Blue Bottle also sells ready-to-drink coffees as well as coffee beans at its cafes and online.

Nestle also operates the Toll House Cafe By Chip concept, which has more than 100 U.S. units. The chain sells cookies, coffee, frozen desserts and smoothies in small cafes, kiosks and, most recently, convenience stores.

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