What they’re saying is that it won’t change us,” a barista at one of Blue Bottle’s Manhattan locations said as he carefully poured hot water over a pile of coffee grounds. Referring to Nestlé’s recent acquisition of the San Francisco-based coffee roaster, he cocked an eyebrow, and looked a little annoyed — either about the news, or at being asked for his opinion. “No, I’m not upset,” he said slowly, cautiously. “And they said the money will help us grow.”

Blue Bottle Coffee Company started as a small roaster in Oakland, California, in 2002. Over the next decade and a half, it expanded throughout San Francisco; opened locations in New York City and Tokyo; purchased Tonx (an online coffee service), LA-based Handsome Coffee Roasters, and Perfect Coffee (which developed an innovative way to sell pre-ground coffee); launched (and killed) a successful wholesale business; and introduced ready-to-drink bottled beverages like cold brew. Along the way, it attracted an unusually devoted group of investors, from notable Silicon Valley venture capitalists like Tony Conrad to Google’s venture arm to mutual funds, who infused the company with over $120 million in private investments.

Earlier this month, food giant Nestlé announced that it was buying a majority stake in Blue Bottle. Nestlé is paying an estimated $425 million for 68 percent of the company — which consists of some 40 coffee shops in the U.S. and Japan (with more on the way), a booming ready-to-drink business, and a nationwide subscription base — effectively valuing it at more than $700 million.

The purchase makes obvious sense for Nestlé: Though Nestlé holds the greatest coffee market share of any company worldwide, in the U.S., it has almost no cafe presence while Starbucks dominates this market. In the past five years, JAB, a Luxembourg-based holding company, has started to edge into Starbucks’ turf by buying up cafes and roasters like San Francisco’s Peet’s, Portland-based Stumptown Coffee Roasters, Chicago-based Intelligentsia, and Panera Bread. The goal of Nestlé’s Blue Bottle acquisition at this juncture is threefold: a play at the region in which it’s least popular; a move into high-end, speciality coffee; and a sign that it’s gearing up to compete with JAB.

But for those who have tracked the rise of coffee’s third wave, Blue Bottle’s deal with Nestlé represents a turning point.

“In 2015, venture capital investors paid a lot of attention to coffee startups,” says Natan Reddy, intelligence analyst at CB Insights, “throwing large sums of money at startups when it was the latest trend.” Headlines in 2014 and 2015 explained “The VC Appeal of Extremely Fancy Coffee,” and “Why high-flying tech investors are putting their money in a coffee shop.” For a few years, all of Silicon Valley’s hottest firms were investing in coffee. But data shows that trend has slowed, “to smaller and fewer deals for the niche coffee space,” Reddy says.

At the same time, consumer interest in high-end, speciality coffee — like the kind made from single-origin beans, poured out of laboratory-like siphons, or topped with precisely steamed milk — is still abuzz. And the bottled coffee market — known in the industry as ready-to-drink brews in shelf-stable or refrigerated bottles, cans, and cartons — has never been hotter. The market for specialty coffee is growing, but private equity interest in it is waning, which means one thing: More than anything else, Nestlé’s deal with Blue Bottle may mean craft coffee has hit its peak.

A few months ago, Blue Bottle CEO Bryan Meehan says he got a call from Nestlé, and a few weeks later its CEO, Mark Schneider, flew to New York. “I took him around our cafes in Brooklyn, and to our roastery in Bushwick,” Meehan says. Later Meehan and Blue Bottle founder James Freeman were invited to Nestlé’s headquarters on Lake Geneva. The location — a shimmering lake surrounded by snow-topped mountain peaks — looks right out of a Bob Ross painting. “We weren’t looking to sell, but we had a lot of offers, as you would expect, with a lot of people approaching us. We say ‘no’ all the time, but there was something about Mark and [Nestlé’s] approach. They wanted to prove they knew high-end coffee,” Meehan says, noting that Nestlé was “willing to let Blue Bottle remain a stand-alone entity.”

Not surprisingly, reaction to the news has ranged from melodramatic to catty. Venture Beat reported that Silicon Valley’s craft coffee obsessives “wept” upon hearing about the deal. On Twitter, fans cried that their favorite independent roaster was “selling out,” and called Nestlé “evil” — but only a few users said they would be canceling their Blue Bottle coffee subscriptions.

According to the deal’s terms, Meehan and Freeman (who gave up his majority ownership stake in 2012 but still steers the company) will retain control of Blue Bottle’s operations and product. “The only changes,” Meehan says, “center around improving our coffee, building new roasteries, building new training centers, adding quality control in production, and making more delicious coffee.” According to Meehan, that he and Freeman will keep their titles and responsibilities after the acquisition is a “first” within the company.

Back when Blue Bottle first started taking significant amounts of outside investment, in 2014, Freeman acknowledged that his company was turning into a chain. “If we’re a chain, let’s be an awesome chain,” he told New York magazine. “There is a number that, if we add that number of stores every year, that will be the number at which we start to suck. My job is to imagine what’s just before that number.”

For doubters, it’s worth acknowledging here that neither the mass market nor (most of) Blue Bottle’s consumers want to see Blue Bottle’s brand change in any significant way. There’s no demand for Blue Bottle K-cups, for instance. And, it’s unlikely that Nestlé will attempt to alter Blue Bottle’s ethos — the thing its customers pay for — at least, not in the beginning. (It’s not hard to imagine Blue Bottle Nespresso pods, and though the company’s Perfect Coffee product is essentially a pod, Meehan fervently rejected that idea when asked.)

For now, Blue Bottle will move forward on projects already in the works: It’s currently eyeing Seoul for its next location. At the time of acquisition, Blue Bottle was already expanding its ready-to-drink offerings, which currently include a canned cold brew and carton of sweetened New Orleans-style coffee. “We’ve got two new products coming out next year, in the area of espresso,” Meehan says. “This is some pretty strong technological innovation in coffee, in bottled iced lattes specifically. We figured out a way of doing it which we think represents what an iced latte should taste like — it’s not just a mixture of milk and coffee.”

What’s in it for Blue Bottle?

Meehan denies rumors that Blue Bottle was losing money and that investors were getting antsy. But in an interview with Grub Street, Freeman made it sound like the roaster was at a crossroads. “There are a few paths a company of our growth rate can take when we’re pursuing capital [at this stage],” Freeman said, and “the first three are kind of unpalatable… IPO is dreary in a number of ways, and borrowing money from bankers, you have to pay it back, and they get a lot of say. We’ve been very, very fortunate with our investors and doing subsequent rounds of investment, but we’re at the point where we had 252 investors.”

Unlike traditional private equity, which drops $100 million or more into well-established outfits, venture capital is a type of private equity that invests relatively smaller amounts in fledgling brands. Like private equity firms, venture capitalists are looking to steer and develop a company in such a way as to make it attractive to potential buyers so they can cash out and collect their returns. After True Ventures invested in Blue Bottle in 2012, Index Ventures, Twitter CEO Ev Williams, skateboarding savant Tony Hawk, and other VC firms followed. Along the way Blue Bottle opened new locations, ceased its wholesale operation, and honed in on ready-to-drink offerings — all moves that would make it attractive to a buyer like Nestlé.

It’s been over five years since venture capital firms first threw cash at their favorite coffee shops, including Blue Bottle. While private investment into food and beverage firms hit an all-time high in the second quarter of 2017, driven mostly by investments into meal replacement liquid Soylent and fat-infused coffee Bulletproof, according to data research firm CBinsights, the number of deals VC firms have made with speciality coffee purveyors has dropped since 2015. As analysts predicted last year, the VC rush, at least into craft coffee, is slowing down.

Though Blue Bottle has never struggled to find funding in the past, it’s possible that in looking towards the future it wasn’t sure how many new or continuing investors it could attract. Blue Bottle may not have sold out, per se, but in one sense the sale to Nestlé certainly was a way out — of the otherwise endless rounds of capital raises.

What’s in it for Nestlé?

Before this acquisition, Nestlé — the largest food company in the world, with annual revenue of nearly $90 billion — had very few standalone coffee shops in its portfolio. (Its main coffee offerings, Nescafé and Nespresso, are retail products.) But while some analysts say the company is looking to compete with retailers like Starbucks, which has nearly 25,000 locations worldwide, Meehan disagrees. “For starts, I don’t think anyone’s trying to compete with Starbucks here,” Meehan says. Instead, “I think what Nestlé is embracing is... an opportunity to really make a major difference in terms of how specialty coffee, particularly ready-to-drink, is delivered around the world at the retail level. That’s their focus, and it’s certainly our focus.”

The bottled coffee market is booming; the biggest players, including Starbucks, are seeing millions of dollars in year over year growth. Every few months brings a new entry into the market, from brands as big and varied as Coca-Cola, Dunkin’ Donuts, and McDonald’s.

Starbucks has been making a play for the speciality coffee market since it launched its Roastery and Reserve Bar concepts in 2014. But while Starbucks clearly wants to become a player in the niche coffee market it once ruled — and may have the resources to do so — Nestlé is likely eyeing another U.S. competitor right now: JAB. The holding company has snapped up Peet’s, Keurig, Intelligentsia, and Stumptown in recent years, not to mention the Minnesota-based Caribou and Jacobs Douwe Egberts. Today, JAB leads the pack in specialty coffee production in the U.S.; Nestlé’s purchase of Blue Bottle puts it in the game.

What’s next for third-wave coffee?

Andrew Barnett, founder of San Francisco-based Linea Coffee, has a unique perspective on the news: He started Ecco Coffee roasters in the early 2000s and sold his company to Intelligentsia, then an independent roaster, in 2009. Barnett says his goal at the time was for his company to grow, using Intelligentsia’s resources and distribution to his advantage. But eventually the Chicago-based roaster consolidated the two companies under the Intelligentsia name.

Though he’s onto his second independent roasting company, Barnett makes it clear that he doesn’t believe there’s anything wrong with outside investment or with selling one’s company. But “there are two sides,” he says. “One side is going to argue that with Nestlé’s financial backing and involvement the customer experience at Blue Bottle is going to go downhill. On the other hand,” Barnett says, acknowledging Blue Bottle’s strengths, “[Freeman’s] success with ready-to-drink, the cans without milk, the milk cartons with cold brew, that gives a company like Nestlé something to grow.”

The sale also increases competition for the last of the original, circa ’90s and early-’00s larger craft roasters that are still standing, including Counter Culture Coffee Company in Durham, North Carolina, and San Francisco-based Philz Coffee (which has already taken a significant amount of outside investment). “I think we’re just going to see more consolidation in specialty coffee, just like we’re seeing in the world of beer,” Barnett says. “Some of the smaller players are just not going to make it because they can’t compete in terms of finding real estate or developing and rolling products onto grocery store shelves.”

Brett Smith founded Counter Culture in 1995 after graduating from business school. He’s fielded many phone calls from private equity and VC firms but has chosen to avoid outside investment. Still, the roaster has slowly but steadily expanded throughout the South, into D.C. and New York, and West into Seattle and San Francisco. For Smith, the news of Nestlé’s Blue Bottle purchase underscored his belief that demand for craft coffee will only continue to rise.

“For Nestlé to come in and to acquire Blue Bottle, I think that’s a pretty big statement on how the industry, the market, and consumers feel about specialty coffee,” Smith says. “At the end of the day, it tells me that a lot of folks out there see the value and really appreciate our segment of the industry.” That might not mean a craft coffee shop on every corner, but it will likely mean more competition in the bottled speciality coffee market where consumers have never been thirstier.

“People still want better access to better coffee. Big money has validated that,” Barnett says. Noting that the biggest craft coffee purveyors have been sold to larger companies, Barnett agrees this might be the industry’s peak. Still, he agrees that consumer demand will continue to grow. “The coffee boom isn’t over.”

Correction: Coffee is not the world’s second largest commodity, as originally reported; that honor, when considering world market value, goes to aluminum. Eater regrets the error.

Daniela Galarza is a senior editor at Eater.

Editor: Erin DeJesus