Keurig Dr Pepper is set to acquire the company that owns Peet’s Coffee in a transaction valued at $18 billion (equivalent to 15.7 billion euros). Subsequently, the company plans to split in two, with one entity focusing on coffee sales and the other on cold beverages like Snapple, Dr Pepper, 7UP, and energy drinks.
The deal, announced on Monday, effectively reverses the 2018 merger between Keurig and Dr. Pepper. This development comes at a time when consumer spending is declining, and trade tensions under President Donald Trump could lead to significant increases in coffee prices.
In the summer, President Trump imposed a 50% tariff on most Brazilian imports following an investigation into former President Jair Bolsonaro, a Trump supporter. Brazil is a leading exporter of coffee globally.
Despite these challenges, Keurig Dr Pepper views both the coffee and cold beverage markets as promising growth areas that could benefit from operating as separate, independent companies. CEO Tim Cofer described the move as a “transformational moment” for the industry.
Cofer stated in a prepared statement, “By creating two distinct beverage companies with appealing and customized growth strategies and capital allocation approaches, we are well-positioned to deliver substantial shareholder value both in the short and long term.”
On the other hand, major chains like Starbucks are experiencing difficulties. Same-store sales, a crucial metric of retail performance, have declined for six consecutive quarters at the Seattle-based coffee giant, leading to a 23% drop in share value since early March.
Dr Pepper Keurig is offsetting some declines with higher prices. In its last quarter, the company reported a 0.2% decline in coffee sales.
For Keurig Dr Pepper, the soon-to-be separated coffee business will have about $16 billion in combined sales and the beverage business about $11 billion, the companies said.
The companies expect to save about $400 million over three years because of the merger.
The company that Keurig Dr Peppper is buying, Peet’s parent JDE Peet’s based in Amsterdam, also owns the brands L’OR, Jacobs, Douwe Egberts, Kenco, Pilao, OldTown, Super and Moccona.
Once the two companies are separated, Cofer will become CEO of the cold beverage business, which will be based in Frisco, Texas. Keurig Dr Pepper’s chief financial officer, Sudhanshu Priyadarshi, will lead the coffee business, which will be located in Burlington, Mass. Its international headquarters is in Amsterdam.
Shares of Keurig Dr Pepper slumped 9% before the opening bell Monday.
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