A perfect blend
The coming together of Mondelez International (MDLZ) and D.E Master Blenders 1753 has created the second largest global coffee entity in terms of retail value. When the new joint venture, Jacobs Douwe Egberts, was finalized in July, Mondelez and D.E Masters Blenders ranked second and third, respectively, in the global coffee market based on retail value.
According to Euromonitor International, Nestlé (NSRGY) (NESN.VX) accounted for 22.7% of the market share of the $81 billion global coffee market in 2013. Mondelez and D.E Master Blenders held 10.9% and 5.4%, respectively, of the global coffee market share.
In 2013, Keurig Green Mountain (GMCR) ranked third with a 3.4% market share. It was followed by Germany-based Tchibo with a 2.5% market share. J.M. Smucker (SJM) accounted for 2.3% of the market share.
Beverage companies make up ~20% of the portfolio holdings of the Consumer Staples Select Sector SPDR Fund (XLP).
Key transactions in the coffee industry
In 2012, privately held group JAB Holding Company acquired Peet’s Coffee & Tea chain and the Caribou Coffee chain. JAB is overseen by its three senior partners, Peter Harf, Bart Becht, and Olivier Goudet.
In 2013, JAB acquired D.E Master Blenders. Now, through Acorn Holdings B.V., JAB will have a controlling stake in Jacobs Douwe Egberts.
Strengths of Jacobs Douwe Egberts
As we saw in part 2 of this series, Mondelez had a leading position in the coffee industry in ten countries, and D.E Master Blenders held a leadership position in six markets in 2013. Even after the prospective sale of the Carte Noire brand and the Merrild brand in the regions advised by the European Commission, Jacobs Douwe Egberts will be a leading player with powerful brands like Jacobs, Maxwell House, and Pilão.
The new joint venture will have a strong presence in complementary regions and a presence in emerging countries like China. The formation of Jacobs Douwe Egberts might trigger further consolidation in the coffee industry.