12 April 2013

Wake up and smell the black gold

Joh A Benckiser has just revealed a multi-billion euro offer to acquire DE Master Blenders 1753 in order to use the Netherlands-based producer of the well-known Douwe Egberts brand as a platform to build up a hot drinks empire. The German consumer products conglomerate is paying out EUR 7,500 million to add to its stable of global labels, which already includes significant stakes in Caribou Coffee and Peet's Coffee & Tea in the US, as part of a drive to create a rival to current market leaders Nestlé and Mondelez.

DE Master Blenders is a leading pure-play coffee and tea company offering a range of well-known brands such as Douwe Egberts, Senseo, L’OR, Pilão, Pickwick and Hornimans in both retail and out-of-home markets. The group listed last year as a spin-off from the US food conglomerate Sara Lee and claims to hold a number of leading sector positions across Europe, Brazil, Australia and Thailand, with sales reaching EUR 2.80 billion in the financial year ended 30th June 2012.

DE Master Blenders will act as a springboard into the home coffee sector, enabling Benckiser to branch out from the coffee shop market. According to Euromonitor International, the company is ranked third in the global coffee roasting industry, making L’OR capsules that are compatible with Nespresso machines and pitting its Senseo system against market leader Nestlé, the Swiss maker of Nespresso.

Coffee comprises an important sector of the wider food and beverage industry and it is sectioned off into growers, roasters and retailers, the latter of which splits into several paths. The at-home market comprises instant, ground and whole gourmet beans sold in coffee shops or at the supermarket while the second segment encompasses coffee shops and operations such as McDonalds. However, the third route is perhaps the most interesting one of late considering its recent growth: the single-serve coffee market, as epitomised by Keurig’s K-Cup, Senseo and Tassimo, not to mention Nespresso, of course.

Notable US coffee sector groups include Green Mountain Coffee Roasters, JM Smucker, Caribou Coffee and Peet’s Coffee & Tea, all of which have been involved, in some form or other, in the industry’s largest M&A deals over the past decade. Other prominent players include Nestlé of Switzerland, India’s Tata Global Beverages and Unilever of the UK.

Meanwhile, the hot beverage powerhouse that is Starbucks has been extending its footprint beyond cappuccinos and lattes with its largest acquisition to date in order to secure a leading position in the rapidly growing USD 40,00 million global tea market. It took US loose-leaf tea retailer Teavana private in December 2012 for USD 620 million, gaining access to an existing network of 300 company-owned mall-based tea stores, of which 247 are in 40 US states and 53 are located in Canada.
© Zephyr