Exclusive-Nestlé explores sale of Blue Bottle Coffee, sources say

By Abigail Summerville

Dec 1 (Reuters) - Swiss food giant Nestlé is working with investment bank Morgan Stanley to review options, including a potential sale, of its Blue Bottle Coffee chain, according to three sources familiar with the matter.

The move is part of a broader strategic review under new Chief Executive Philipp Navratil to streamline the company's portfolio and exit the business of operating physical retail locations, reflecting a wider industry trend.

Nestlé acquired a majority stake in Blue Bottle Coffee in 2017, valuing the premium roaster known for its drip coffee at roughly $700 million. A sale is expected to value the chain at a discount to that, the sources said, requesting anonymity as the matter is private. Coca-Cola is also exploring a sale of its coffee chain Costa Coffee.

Nestlé and Morgan Stanley declined to comment.

In July, Nestlé launched a strategic review of certain vitamin brands, including Nature's Bounty, Osteo Bi-Flex, Puritan's Pride and its U.S. private label business. It also plans to divest its water business, which includes the Perrier and S.Pellegrino brands.

Nestlé operates around 100 Blue Bottle locations across the U.S. and Asia. It also sells Blue Bottle-branded products like coffee grounds and mugs. One source said Nestlé could decide to sell the cafes but retain the brand's intellectual property to continue selling the products. 

Founder James Freeman launched Blue Bottle in 2002 in Oakland, California, with the first storefront opening in 2005 in San Francisco.

Nestlé's bigger coffee businesses include Nescafé and Nespresso.

(Reporting by Abigail Summerville in New York; Editing by David French and Lisa Shumaker)