Nestlé USA today announced the acquisition of insurgent coffee company Chameleon Cold-Brew for an undisclosed sum, roping the Austin, Texas-based brand into its widening coffee portfolio and further positioning the food and beverage conglomerate to challenge and disrupt the U.S. ready-to-drink (RTD) market.
Chris Campbell, co-founder, CEO and president of Chameleon, will remain in his position. He told BevNET this week that the organic cold brew maker will stay “independent” and characterized the deal as more of a partnership than a traditional acquisition. No structural or staffing changes are currently planned and the company will continue to operate out of its homebase. Under the terms of the deal, Chameleon will receive financial support and access to Nestlé’s production and distribution networks as well as industry data that will help facilitate the brand’s growth nationwide.
“The key thing here is that we’re going to keep doing what we’re doing, but we’re going to do it faster, bigger and better,” Campbell said. “The direction we’ve been moving in is continued triple-digit growth, expansion in portfolio, coffee in ambient… we were expanding in a variety of ways, a variety of formats, and a variety of markets and channels. Chameleon is going to continue to do all of those things, but now we’re going to do that with a partner that’s got our back.”
The deal comes on the heels of Nestlé’s acquisition of another premium coffee company, Blue Bottle. The California-based roastery, e-commerce retailer and café chain was purchased in September and prompted speculation in the industry about whether Nestlé was seeking to challenge fellow coffee giants Starbucks and JAB Holdings Co., the latter of which owns Peet’s, Stumptown and Intelligentsia.
Campbell said the companies first came into contact about a year ago, when Chameleon was seeking capital for 2017. During the process Chameleon found that there was “strategic interest” in working with Nestlé beyond just raising funds, which opened up discussions that would eventually lead to the acquisition.
Founded in 2010, Chameleon has quickly grown to become one of the top cold brew coffee brands in the U.S., with its concentrate and ready-to-drink coffee lines finding success in the natural and speciality channels via retailers such as Whole Foods. Its concentrate and RTD lines topped $16 million in sales within supermarket, drug, club and convenience channels for the previous 52 weeks as of Sept. 10, according to retail data firm IRI, which also showed growth of nearly 100 percent, the result of Chameleon advances into wider distribution. The company reports it sold more than four million bottles in 2016 and has already topped that number for 2017, with placement in more than 10,000 retailers nationwide.
Chameleon has also made moves in the drug and box store channels, and Campbell said the Nestlé deal will help to facilitate deeper dives into grocery, club and foodservice accounts.
While Chameleon has enjoyed success with its concentrate line, the company continues to grow its other products while maintaining an ambitious innovation pipeline with new products planned for an early 2018 launch. In September, at Natural Products Expo East, the company unveiled a four-SKU sparkling cold brew. It also continues to sell cold brew kits and pods as well as whole bean blends, although they compose a small part of the company’s overall business.
Chameleon is looking to grow its RTD business, Campbell said.
“I think the way RTD evolves over time is going to be critical and we have a very clear strategy on how we intend to do that,” Campbell said. “We continue to do well in concentrate and put that product in front of more people and more places that’s appropriate to the brand. And then we want to accelerate and amplify the offering for RTD, and to do it better in the right places for the right pricing.”
But Campbell said he doesn’t want the company to grow too fast. Although Nestlé opens the doors for rapid expansion cross-country, Chameleon plans to continue taking a more deliberate path towards growth.
“For us, it’s really following the game plan that we wrote about RTD a couple of years ago,” he said. “But all of a sudden we have a whole different set of options that we can pull from for any department of the company. Whether it’s sales, marketing, operations, or finance, we’ve got resources we just didn’t have last week.”
Nestlé chairman and CEO Paul Grimwood was unavailable for comment. In an Oct. 23 Medium post, Grimwood wrote that the food and beverage market was evolving rapidly and that the company was seeking out more environmentally friendly and value-driven brands for acquisition, noting that modern consumers “expect high-quality products that are nutritious and responsibly sourced.”
Despite entering the Nestlé portfolio around the same time, Campbell said he didn’t see Chameleon and Blue Bottle stepping on each others toes. Although Blue Bottle sells RTD products, the brand remains primarily a café and e-commerce business, while Chameleon is focused on home-use and single-serve retail products.
Facing a saturated market for cold brew and craft offerings, Campbell sees a bright future for brands benefiting from a more knowledgeable consumer. The category, he said, is beginning to resemble wine as coffee drinkers develop more refined palates with a sense for origin and flavor notes.
“If nobody innovates and nobody brings something new and interesting to market then, yeah, maybe [premium coffee] will peak,” he said. “But as long as people like us and others continue to bring new and interesting opportunities for experiencing coffee to the consumer, then I think they will continue to embrace those opportunities.”