Posted: February 1, 2018 |  AUTHOR: KEN FOX | CONTACT ME

 

I. Overview

U.S. Foreign Direct Investment is increasing due to multiple factors. These include President Trump’s threats to raise tariffs on imports, the recently passed lower corporate tax rates as well as states vying for business. A by product of this trend are investors or company buyers which are not well known to most people. This blog focuses on one such company, and its growing basket of well known U.S. brands. 

JAB Holding, is a German privately held company headquartered in Luxembourg. The company is owned by the wealthy and reclusive Reimann family.* Three seasoned European business executives advise and run the company. They are:

1. Bart Becht, CEO, a past CEO of Reckitt Benckiser for 12 years until 2011

2. Peter Harf, worked with Bart to take the Dutch company Benckiser public in 1997 and later merged it with UK’s Reckitt & Colman Food business.

3. Olivier Goudet, Chairman of Anheuser-Busch InBev

Apparently, Peter is the visionary and Bart is operational. All three avoid publicity and rarely speak to the media.

   

II. Brand Portfolio:

JAB Holding has been on an acquisition binge over the past six years, spending $58 billion to establish a coffee, beverage and breakfast strategic platform. The company has quietly acquired the following companies:

1. Keurig Green Mountain for $14 billion in 2014, which included coffee roaster and retailer Stumptown Coffee and coffee bar chain

2. Jacobs Douwe Egberts (JDE), a name changed from acquiring De Master Lenders 1753, spun out of Sara Lee Corp and acquired for $9.8 billion in 2013. It is a major global seller of coffee and tea products and coffee machines. It owns many global brands.** Based in Amsterdam, The Netherlands.

3. Panera Bread in July 2017 for $7.5 billion, which operates 2,100 stores; based in Sunset Hills, Missouri, USA

4. Peet’s Coffee and Tea in 2012 for $974 million. Based in Emeryville, CA, USA. Has 246 U.S. stores, and opened its first international roastery and cafe in Shanghai, China (Nov. 2017).

5. Einstein Noah (Bagel) Company for $370 million in 2014, operates 850 stores.

6. Caribou Coffee Company in 2013 for $340 million, based in Minneapolis, Minnesota, USA.

7. Espresso House, a leading coffee brand in Sweden and Norway for $300 million in 2015.

8. Others include: Krispy Kreme Donuts, Brueggers Bagels and Au Bon Pan.

JAB Holding also recently acquired Dr. Pepper Snapple in January 2018, which includes A&W Root Beer, 7 UP and Sunkist orange beverages, for $18.7 billion in cash. JAB will incorporate its Keurig Green Mountain business into Dr. Pepper Snapple, while keeping it a publically traded company renamed Keurig Dr. Pepper. Analysts estimate the new company will have a market value of about $33 billion.

“Combined, our nationwide distribution system will be unrivaled, says Keurig Chief Executive Officer, Bob Gamgort.

  

JAB Holdings also owns or is part owner in food maker Reckitt Benckiser Group PLC and  health, beauty and designer clothing brands, such as Coty (which owns Calvin Klein), Cover Girl and Marc Jacobs. JB Holdings also owns Bally International AG, based in Switzerland, which manufactures high end footwear, handbags, clothing and accessories.

There are rumors JAB Holdings wants to acquire Dunkin’ Brands. “Buying Dunkin’ would give JAB an enviable position in the coffee and snack space,” says Neil Saunders, Managing Director of Global Data.

JAB Holding has also been selling assets not envisioned as part of the its growing coffee or beverage platform, specifically Belstaff fashion to Ineos in July 2017, and shoe company Jimmy Choo for $1.2 billion to Michael Kors. Bally International may be next for sale.

III. Influence on the Coffee Industry

JAB Holding is disrupting the coffee business, some say similar to what InBev did to the beer industry. In so doing they are benchmarking and challenging Nestle, a leader in the global coffee business. JAB Holdings is asking its suppliers to extend credit up to 300 days, some for 260 days, helping to increase cash flows. It’s estimated the JDE group alone buys 720,000 tons of coffee a year. This quantity has obvious implications for distribution and other synergies with its sister companies.

Commentary

JAB Holdings is creating a mega business centered around coffee and beverages. The idea of bringing together multiple brands with strong brand equities (brand value) and corresponding distribution channels provides a formidable competitor to well established beverage brands. JAB’s global competitors in this regard will be Coca-Cola, Nestle, PEPSICO and even Starbucks. JAB’s economies of scale in buying may represent competitive advantages in certain global markets.

Consider some of their opportunities. JAB’s value propositions might introduce established brand names in new markets such as Peet’s new entry into China using their own stores. Peet’s coffee retail prices might be appealing to thrifty, young Chinese customers who want to pay less for coffee than at Starbucks. JAB may also have new ideas how to leverage their retail tea business given learning from Starbuck’s failed Teavana Stores.

Finally, if JAB acquires Dunkin’ Brands, which also owns Baskin-Robbins, it would add approximately 18,000 points of distribution in 60 countries. JAB is a company to watch and see how their many brands are leveraged.

*Reimann family= read #8 in the resource listing below

**Select coffee and tea brand names operating under by the D.E Master division include: Douwe Egberts, L’Or, Marcilla, Merrild, Kanis & Gunnink, Pickwick, Bravo, Jacqmotte, Senseo, Pilao, Caboclo, Moka, Prima and Omnia.

Resources

  1. Buy Now, Pay Later Helps JAB Billionaires Build Beverage Empire, Isis Almeida and Marvin Perez, Bloomberg Business Week, January 30, 2018.
  2. JAB’s Bart Becht to Stir Up U.S. Beverage Market, Scheherazade Daneshkhu, Financial Times, February 2, 2018.
  3. Coffee Group JAB Holdings to Buy Dr. Pepper Snapple, Arash Massoud & James Fontanella-Khan, Financial Times, January 29, 2018.
  4. Peet’s Opens Flagship Roastery Cafe in Shanghai, China, Nick Brown, Daily Coffee News, November 14, 2017
  5. Investors are Speculating that Krispy Kreme owner could Try to Acquire Dunkin’ Brands, Sarah Whitten, CNBC, October 31, 2017.
  6. A European Company You’ve Never heard of Has Quietly Acquired Panera, Au Bon Pan

      and Krispy Kreme in its Quest to Build A Coffee Empire, Frank Chaparro and Kate Taylor, Business Insider, November 9, 2017. 

6.    JAB Holding Company profile, WIKIPEDIA

7.    D.E. Master Blenders 1753 N.V. Profile, Bloomberg

8.    Germany’s Intensely Private and Immensely Wealthy Reimann Family, by James Shorter, Financial Times, March 11, 2016.

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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