GCR linkedin Logo

Jacobs Douwe Egberts aims for global domination

From the March 2016 issue.

The biggest deal in coffee history has just created the world’s second largest coffee company. GCR Mag looks at the steps Jacobs Douwe Egberts has taken to come so close to top spot.

A joint venture between DE Master Blenders and Mondelēz International looks set to shake up the global coffee landscape.

The Jacobs Douwe Egberts (JDE) joint venture, which was created in 2015, is now in a position to challenge the global dominance of the world’s largest coffee company, Nestlé.

Analysts from the Russian Association of Tea and Coffee Producers say the deal between Mondelēz and Master Blenders has become the largest in an industry that has rapidly consolidated in the past five years, with more than 100 deals worth almost US$23 billion.

To add to the grandeur of the deal, at the end of 2015, JDE closed a deal for the acquisition of Keurig Green Mountain, a leading US coffee maker and specialty packaged coffee company. This move will allow JDE to significantly expand its presence in the North American market and strengthen its positions in the EU.

JDE is currently controlled by JAB Holding Company, a privately held investment firm based in Luxembourg that manages the Reimann family’s $16 billion. It has ambitious plans to make JDE the world’s largest coffee company.

Chairman of JAB Holding Company, Bart Becht says JAB will continue to look at acquisition opportunities in the global coffee market. In addition to this, the company puts hopes on further organic growth. 

“Coffee is our bread and butter,” Becht says. “Further consolidation in the coffee industry offers possibilities for us, so we will continue to look at opportunities down the road.”
With a market share of 16.3 per cent, the newly formed JDE is now the world’s second largest player in the $81 billion global coffee market. With the addition of Keurig’s brands and products to its portfolio, the company is set to increase its share to 20 per cent.

That falls just shy of Nestlé’s market share, which currently sits at around 23 per cent, according to predictions by analysts at the Russian Association of Tea and Coffee Producers. In this tight race, the company could lose its leadership in the global coffee market by as soon as the end of the current year, as the pressure from competitors keeps growing.

Business analyst Euromonitor forecasts that the acquisition of Keurig will allow JAB to increase its share in the pre-packed pods and capsules market to 41 per cent, and even more if it is successful in implementation its plans to further expand its range in the pod and capsules category.

This move will be helped by the use of Keurig’s strong partnerships with companies such as  Starbucks and Dunkin’ Brands, which make these brands available with its coffee machines.

Part of JAB’s plans is the expansion of Keurig machines into Europe. It is planned that they will be priced at $79.99, which is significantly cheaper compared to those of Nestlé, which are around $149.

According to Euromonitor, Keurig holds around 61 per cent of the North American single-serve coffee market, which is significantly higher than Nestlé’s 4 per cent share. However, the latter has traditionally concentrated on the European market and has been working to increase its popularity in the US.

Currently Nestlé continues to dominate in the global instant coffee market with its Nescafé brand, which accounts for about 17 per cent of the global instant coffee market. However, the positions of its Nespresso brand in the coffee pod and capsules segment could be threatened after JDE’s acquisition of Keurig.

In addition, Nestlé may find it difficult to compete with the newly established joint venture even in the European continent, taking into account Mondelēz’s leading market position in the coffee market in 10 regions, including France, Ukraine, and Sweden. The same applies to D.E Master Blenders, which has a leading market position in six countries, including the Netherlands, Norway, and Belgium.

At the same time, Mondelēz’s position in China remains relatively strong, where it holds 50 per cent of the local market and plans to further expand its presence over the next several years.

© Copyright 2020 Prime Creative Media Pty Ltd. All rights reserved.

ABN: 51 127 239 212