Keurig-JAB deal may improve machines, K-Cup sustainability: Euromonitor analyst
The single-serve coffee pod and machine manufacturer was purchased by JAB, a private investment company, for $92 per share in cash, which equals roughly $13.9bn.
More sustainability, less worry
Euromonitor senior beverages analyst Virginia Lee told BeverageDaily that she could envision this deal making way for other coffee company consolidations globally.
Lee also suggests that it will allow Keurig to fix issues with the company’s machinery and coffee pod sustainability, which has hurt sales and the company’s stock price over the last year.
“In terms the K-cups themselves, they announced a while ago that they’re working toward more sustainable solutions,” she said. “This cash infusion will definitely help Keurig to bring out a compostable or recyclable coffee pod.”
The agreement has been approved by Keurig’s board of directors and will likely close during the first quarter of 2016, according to the companies.
The agreement represents about 77.9% of Keurig’s closing stock price as of December 4, 2015, prompting shares to jump 74% to $89.95 before the market opened Monday.
Even after the transaction, Keurig will continue to be privately owned and operated independently by the company’s management and employees.
A ‘major step forward’ in global coffee
Bart Becht, Chairman at JAB, said this purchase represents a “major step forward” in the creation of JAB’s global coffee platform. The company also has controlling stakes of Peet’s Coffee & tea, Caribou Coffee Company and Denmark’s Espresso House, among others.
JAB likely sees the huge potential owning a large interest in US and world coffee can bring, Lee said. According to numbers from Euromonitor, the retail coffee market is poised to grow 9% between 2014 and 2019. In addition, fresh ground coffee pods are expected to have a 25.2% growth over the same period, a 4.6% growth each year.
“My impression is that this will help them in several ways in terms of the supply chain - with the coffee business a lot of it is the ability to source quality coffee beans all over the world,” she said. “Combining all these coffee businesses, it allows them purchasing power and to establish relationships with coffee farmers.”
Lee said the acquisition may also help combat the growing power of retailers, as manufactures have looked to get bigger and reduce costs. She cited the Kraft-Heinz merger as a similar example.
An under-discussed aspect of the deal may be the US and world office market, Lee said. Many white collar workers want to extend “soft benefits,” such as coffee, snacks and meals, she said. The coffee pod market may see improvements based on more businesses investing in them for workers.
