Starbucks deal gives Nestle more punch in fight with JAB
LONDON/ZURICH/LOS ANGELES: Nestle’s US$7 billion licensing deal for Starbucks’ retail business gives it a much-needed boost in its battle against JAB, the privately owned investment firm stirring up the coffee industry with a string of deals. JAB, the family office of Europe’s billionaire Reimann clan, has built up the world’s second-largest coffee business over the past five years.
It controls packaged brands such as Kenco and Douwe Egberts; retail chains like Peet’s and Espresso House; and Keurig, the leading at-home single-serve brewer system in the United States.
JAB is unlikely to make another major move right away, analysts say, as it is still busy with a giant deal to buy soft-drink maker Dr Pepper Snapple, turning its coffee fortress into a wider drinks empire.
This may help blunt the blow of Nestle’s incursion onto its home US turf. But JAB is expected to keep growing, especially now that Starbucks will get super-charged by Nestle.
“There is no other brand like Starbucks so we would expect JAB to respond by continuing to innovate and acquire businesses to increase the breadth of their offering and their resources for innovation,” said Christopher Rossbach, chief investment officer at London-based private investment office J Stern, a long-term Nestle shareholder.
Coffee is one of the few bright spots in a drab packaged food landscape. Because it is still fragmented, analysts and bankers expect more deals to come in a category fueled by young consumers. How Nestle and JAB position themselves against growing competition will determine their future success.
“It’s two players in an arms race, each looking for ways to reinforce their positions,” said Will Hayllar, partner at OC&C Strategy Consultants.
Nestle, the world leader by far, has risen to the challenges as its flagship instant Nescafe has been overtaken by fancier brews, with new products such as baristastyle Nescafe Azera coffee and its mass-market Nescafe Dolce Gusto brewer system. — Reuters