Nestlé is spending up to $500 million to buy a majority stake in trendy coffee chain Blue Bottle (NESN)

blue bottle coffee company

Nestlé is dropping up to $500 million to take a majority stake in hip coffee brand Blue Bottle.

The Swiss company is taking a 68% stake in Blue Bottle, the Financial Times reported Thursday. The deal values the 50-plus-location coffee chain and roastery at more than $700 million.

Blue Bottle has spent the last 15 years winning over coffee snobs since being founded in Oakland, California in the early 2000s. The chain is known for its freshly roasted beans and hip coffee shops, which have become a Silicon Valley favorite.

The deal lends Nestlé Blue Bottle's hip, coffee snob-approved reputation. And, it gives the small chain access to huge amounts of cash from the largest food company in the world.

"My goal as CEO has been to secure a sustainable future for Blue Bottle Coffee that would enable it to flourish for many years to come," Blue Bottle Coffee CEO Bryan Meehan said in a statement. "I'm excited to work with Nestlé to take a long-term approach to becoming a global leader in specialty coffee."

blue bottle coffee

Blue Bottle said in a joint statement with Nestlé that it plans to have 55 stores open by the end of this year, compared to just 29 at the end of 2016. There are currently Blue Bottle stores in the Bay Area, Los Angeles, New York City, Washington, DC, and Tokyo.

Blue Bottle has raised a total of $120 million over the last 15 years from investors including Morgan Stanley, Fidelity Management and Research, and True Ventures, as well as celebrities such as Bono, Jared Leto, and Tony Hawk.

Starbucks executives have said that independent, trendy coffee shops — such as Blue Bottle — are the biggest threat to its business. With Blue Bottle backed by a company with billions of dollars in annual revenue, the trendy chain has the potential to become a major threat to the coffee giant.

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