Keurig Dr Pepper will buy the owner of Peet’s Coffee, Douwe Egberts and Kenco in an $18bn deal, then break itself in two, with one company selling coffee and the other selling cold beverages like Snapple, Dr Pepper, 7UP and energy drinks.
The agreement announced on Monday will essentially unwind the 2018 merger of Keurig and Dr Pepper and it arrives at a time when consumers are pulling back and the trade wars under Donald Trump threaten to send coffee prices soaring.
Trump imposed a 50% tariff this summer on most imports from Brazil – the world’s leading coffee producer – for its investigation of its former president, Jair Bolsonaro, a Trump ally.
Yet Keurig Dr Pepper sees coffee and cold beverages as areas of growth that would be better navigated by independently operating companies. CEO Tim Cofer called it a “transformational moment” for the sector.
“By creating two sharply focused beverage companies with attractive and tailored growth propositions and capital allocation strategies, we are poised to generate significant shareholder value in both the near and long term,” Cofer wrote in prepared remarks.
But large chains like Starbucks are suffering. Same-store sales, a key barometer of a retailer’s health, has fallen for six straight quarters at the Seattle coffee giant and its shares have tumbled 23% since early March.
Dr Pepper Keurig is offsetting some declines with higher prices. In its last quarter, the company reported a 0.2% decline in coffee sales.
For Keurig Dr Pepper, the soon-to-be separated coffee business will have about $16bn in combined sales and the beverage business about $11bn, the companies said.
The companies expect to save about $400m over three years because of the merger.
The company that Keurig Dr Pepper is buying, JDE Peet’s, is based in Amsterdam, and also owns the brands L’OR, Jacobs, Pilao, OldTown, Super and Moccona.
Once the two companies are separated, Cofer will become CEO of the cold beverage business, which will be based in Frisco, Texas. Keurig Dr Pepper’s chief financial officer, Sudhanshu Priyadarshi, will lead the coffee business, which will be located in Burlington, Massachusetts. Its international headquarters is in Amsterdam.
Shares of Keurig Dr Pepper slumped 9% after the opening bell on Monday.
