That's a strong cup of joe! Mondelez International (NASDAQ:MDLZ) is combining its coffee business with that of D.E. Master Blenders (NASDAQOTH:DEMBF) to create a new global pure-play coffee giant. With international brands including Gevalia, Tassimo, Senseo, and Maxwell House (outside of the U.S. only, though), the joint venture -- to be called Jacobs Douwe Egberts -- will see the snack foods specialist own a 49% ownership stake in the entity that will have pro forma revenue in excess of $7 billion annually, making it the second-largest packaged coffee company in the world. 

According to the market researchers at Euromonitor International, global sales of packaged coffee grew by more than 33% over the past five years to $81 billion last year, and it's estimated the industry will exceed $100 billion by 2018, a steady 4% annual compound growth rate. The U.S. is the world's biggest consumer of the beverage and the National Coffee Association says the drink is enjoyed by 83% of all adults here, a third of whom consume gourmet coffee.  Consumption of traditional coffee, however, has fallen below 50% of coffee drinkers.

As part of the creation of the new coffee venture, Mondelez will receive $5 billion for its brand contributions outside of France. D.E. Masters current owner Acorn Holdings will hold a majority share of the company, a majority of seats on the board, and see D.E. Masters current chairman serve as Jacobs Douwe Egberts chairman . A separate offer has also been made by Acorn for Mondelez's brands in France. All the transactions are expected to be completed sometime next year, subject to regulatory approval. 

The combined company will own a 16% share of the global coffee market, enabling it to more effectively challenge the world's biggest coffee giant, Nestle (NASDAQOTH:NSRGY), which has a near-23% share. Particularly in instant coffee and the capsule markets, with greater depth for marketing and product development, the new company can take on Nestle's dominance.

Spun off from Sara Lee two years ago, D.E. Master Blenders was quickly bought up last year by the Joh. A. Benckiser investment group for $10.4 billion. Now known as JAB Holding, it has been steadily gathering together global coffee assets, having purchased both Peet's Coffee and Caribou Coffee in 2012. It also controls D.E. Master's owner, Acorn.

Mondelez itself has been the subject of attention from billionaire investor Nelson Peltz, who is intent on remaking the company into a pure-play snack giant. It was his idea to have PepsiCo (NASDAQ:PEP) split its beverage and snack businesses and buy Mondelez to create a true global powerhouse. Although he's since given up on Pepsi buying Mondelez after accepting a seat on the snack company's board, you can see his influence in the decision to shed the coffee business, which saw revenues fall in the low single digits last year due to lower green coffee costs, particularly in roast and ground coffee, that makes up about 40% of its business (green coffee is coffee beans before they've been roasted, but after they're skin has been removed ).

Yet it's a good time to create a new, global brand. Coffee prices are soaring because of a record drought in Brazil, which accounts for approximately a third of the world's coffee output, and it's also the biggest grower of coffee. Arabica coffee beans, which are the world's most popular variety, have seen prices soar more than 80% this year while robusta beans are up 27%.

Even as that brought volatility to Mondelez, the coffee division was still a high-margin business. In shedding it now, however, some analysts are concerned it may be trying to cut costs too much that it will impact performance. But Mondelez has said coffee was always seen as an extra business and wasn't included in the company's guidance, so calving it off while still retaining a stake could give it the best of both worlds.

Shares of Mondelez International are up 23% so far this year and are 37% higher over the past 12 months (they surged 8% after the news). As they're trading at a premium now to both sales and growth estimates, investors may want to hold off snacking on Mondelez's stock until all the parts stop moving.

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.