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Instant Analysis: Mondelez International Now Owns 24% of Keurig Green Mountain

By Beth McKenna - Mar 10, 2016 at 2:41PM

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The global snack food giant owns a stake in the holding company that now owns the leading single-serve coffee company. Does it matter?

Image source: Keurig Green Mountain. 

What happened? 
Global snack food giant Mondelez International (MDLZ 2.64%) filed an SEC form 8-K on Monday disclosing that it exchanged a portion of its ownership in Jacobs Douwe Egberts (JDE) for a 24.24% stake in Maple Parent Holdings Corp., the newly formed entity that owns Keurig Green Mountain. (JDE is the coffee joint venture formed last July when Mondelez and D.E. Master Blenders 1753 combined their respective coffee businesses.)

Mondelez's transaction follows Keurig's previously announced acquisition on March 3 by a subsidiary of Acorn Holdings, an investor group led by JAB Holding Co. Following the exchange, Mondelez's share of ownership in JDE was reduced to 26.5%. 

Mondelez is a world leader in biscuits, chocolate, gum, candy, and powdered beverages, with top brands such as Nabisco, Oreo, Cadbury, Trident, and Tang.

Does it matter? 
This event is worth noting, but is currently not of significance to Mondelez's business, whose stake in Keurig's holding company accounts for a very small percentage of its overall business. Based on the size of Mondelez's coffee business (just over 7% of its total revenue) when it transferred it into JDE for a 43.5% stake in that entity, we're talking in the low- to mid-single-digit percentage.

This stake, however, could become meaningful in the future. Despite Keurig's slowing revenue growth in more recent years, its K-Cups remain the fastest-growing segment in retail coffee, as growth in the traditional bagged category has generally been flat. If this growth continues or accelerates under the new ownership, Mondelez's stake in Keurig's holding company might become significant enough to make a difference in its earnings. 

It remains to be seen if Keurig's new ownership will affect J.M. Smucker (SJM 2.33%), which last year was awarded the enviable license from Keurig and Dunkin' Donuts to sell Dunkin' K-Cups in outlets where groceries are sold. I'd venture to guess nothing will change on this front for now as Smucker has produced strong sales of this product. Smucker also sells Folgers' K-Cups. 

 

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Stocks Mentioned

Mondelez International, Inc. Stock Quote
Mondelez International, Inc.
MDLZ
$62.65 (2.64%) $1.61
Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
GMCR.DL
The J. M. Smucker Company Stock Quote
The J. M. Smucker Company
SJM
$128.88 (2.33%) $2.94

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