Please ensure Javascript is enabled for purposes of website accessibility

Coffee Gets a Hot Dose of New Competition

By Andrew Marder - Apr 13, 2013 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You may not have heard of Joh. A. Benckiser yet, but the company is making big waves, and investors should watch out.

The world is getting smaller, or at least more connected. In an odd reversal of business, it seems more and more brands are being consolidated under one big owner -- almost the way it was in the early part of the 20th century. Yesterday, another massive company slipped under the waves, when D.E. Master Blenders agreed to sell itself off to Joh. A. Benckiser, or JAB.

Never heard of JAB or Master Blenders, you say? That's not really surprising, as both are European companies. But even if you don't know them, you know their work, and with this purchase, you might know their wrath.

The Continental Congress
JAB is a sort of multiheaded beast of an investment arm, which buys and holds companies for the Reimann family. The Reimanns, in turn, are wealthy -- about $20 billion net worth  -- heirs to a chemical company fortune. JAB is a private investment arm, which works on its own and through three other vehicles:

  • Coty is a majority-owned beauty product company, which produces Calvin Klein, Adidas, and other designer perfumes.
  • Reckitt Benckiser is a home-products company, which manages dozens of brands, including Air Wick, Clearasil, and Old English in the United States.
  • The LABELUX Group owns Jimmy Choo and Bally and focuses on high-end fashion

The most recent buying spree has come from the root company, JAB. In the past year, it has purchased Peet's Coffee and Tea for $975 million, Caribou Coffee for $340 million, and now Master Blenders for $9.8 billion. In less than one year, the company has amassed a multibillion-dollar global coffee position.

This is where we look out
That's a good reason to be worried, if you're an investor in Starbucks (SBUX 2.77%) or Green Mountain Coffee Roasters (GMCR.DL) or really any major coffee company. Master Blenders' main line is a brand called Douwe Egberts, which used to be served in Burger King (BKW.DL) until the company signed with Seattle's Best, a Starbucks brand.

So far, JAB has said that it's not planning to combine the operations of its three new brands. Instead it plans to keep the American coffee shop companies doing their thing, and the European production arm doing its thing. But Master Blenders does have the ability to make pods to go up against Green Mountain and others, and if it wanted to, the company could use that capability to make a move in the American market.

It could also move against Starbucks, by using its European production capabilities to bring new lines to the U.S., or by using its U.S. cafe brands to bring new competition to Starbucks in Europe. No matter what JAB does, it's almost certainly going to present new challenges for U.S. coffee brands in the future. Investors should watch for any new business lines from JAB and keep an eye out for more acquisitions in the near future.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Restaurant Brands International Inc. Stock Quote
Restaurant Brands International Inc.
Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
Starbucks Corporation Stock Quote
Starbucks Corporation
$74.49 (2.77%) $2.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.