Starbucks  gained just under one percent of market share during Q1 ended Dec. 31 in ground, roasted and K-Cup coffee in shifting its licensed business to Nestle, company executives said in releasing earnings.

Nestle is expanding Starbucks’ brand presence in international markets and will bring it into its Nespresso and Dolce Gusto platforms starting in the spring, Starbucks CEO Kevin Johnson said.

Starbucks reported a 20% decline in operating income to $175.7 million in its “channel development business,” which includes the Nestle agreement, partly due to $5.5 million in startup costs tied to the “Global Coffee Alliance” – a venture the two established as an element of the deal. Revenue fell 20% to $504.6 million; it said the transition to a licensed business reduced revenue by $130 million.

The agreement covers distribution globally outside Starbucks coffee shops in 190 countries for the Starbucks, Seattle’s Best, Teavana and Starbuck Via brands. It excludes ready-to-drink products (for which PepsiCo is the licensee) and sales to Starbucks’ own shops, where Starbucks remains the supplier.

Starbucks Q1 net income declined to $760 million from $2.2 billion a year earlier, which included the $384 million sale of the Tazo tea brand to Unilever.  Revenue rose 9% to $6.6 billion on a 4% gain in same-store sales.

Contact:

Starbucks, John Culver, Group President of International, Channel Development and Global Coffee and Tea, 206-447-1575.

Nestle, Deborah McRonald, Assistant VP and Head of Licensing, 973-593-7500