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The consolidation of coffee

From the January 2020 issue.

For nearly a decade, the global coffee industry has become increasingly concentrated as the big have gotten bigger. Experts and players weigh in on what it means.

ConsolidationNearly eight years ago, German conglomerate JAB Holding Company acquired San Francisco-based Peet’s Coffee, kickstarting a coffee shopping spree for the company and within the greater coffee industry.

Three years later it would buy Keurig Green Mountain, which would then go on to purchase Dr Pepper Snapple. Within three more years, Nestlé would buy Starbucks’ retail division, and Coca-Cola would buy UK coffee shop chain Costa Coffee. Meanwhile, indie roasters were getting snatched up, coffee-adjacent brands entered the mix, and the acquired became acquirers themselves.

Global tech giant Amazon even joined the action in August 2017 through its purchase of Whole Foods, which owns the Allegro brand of coffee and its in-store coffee counters.

In the midst of all this activity two years ago, when Global Coffee Report first covered this rampant feeding frenzy, the industry was abuzz. Experts projected that the merger and acquisition activity would continue – and it did. In addition to the Dr Pepper Snapple, Starbucks, and Costa deals, other notable transactions since GCR’s first report in 2017 include JAB’s purchase of UK café chain Pret a Manger, Kraft Heinz’s purchase of Ethical Bean, Lavazza’s purchase of Mars Inc.’s drinks division, and Jollibee Foods’ purchase of Coffee Bean & Tea Leaf.

In recent years, there has also been an increasing number of transactions at more varied stages of the coffee value chain. In green coffee buying, Sustainable Harvest purchased Twin Trading in November 2019 after learning the UK business was closing its doors. Further down the chain, in-home espresso machine maker De’Longhi purchased a 40 per cent share of professional-grade espresso machine maker Eversys in 2017, with the option of acquiring the remaining 60 per cent within four years. De’Longhi, which is open to similar opportunities as part of its growth strategy, will finalise the deal in 2021.

Jeffrey Young, CEO of global research firm Allegra World Coffee Portal, was one of those aforementioned experts who expected the industry to continue consolidating. “The big are getting bigger, and so now we see this coalescence of four main entities that are really starting to control a huge amount of the world’s coffee,” he tells Global Coffee Report. “This is the rise of big business in coffee.”

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