With the purchase of its third coffee company in less than a year, German consumer products firm Joh. A. Benckiser (JAB) is spending real money to get its arms around both the coffee shop business and the home coffee buyer. JAB announced this morning that it will acquire D.E. Master Blenders 1753 for $9.8 billion.
JAB paid $1 billion last July to acquire U.S. coffee company Peet’s and another $340 million to purchase Caribou Coffee in December. That’s more than $11 billion, which is still far less than the $41 billion or so that Starbucks Corp. (NASDAQ: SBUX) is worth, but Europe is where Starbucks has its fewest licensed stores.
In its annual 10-K filing, Starbucks noted that European operating income fell $30 million in 2012 and that the company replaced its European management team during the year. The filing does not list any specific revenue targets for Europe, but does say that the company is looking for an operating margin in the mid-teens and expects the “turnaround will take time to gain traction.” In 2012, European operating margin was less than 1%.
Today’s acquisition gives JAB, a privately held firm that owns Coty Inc. and other consumer products companies, strong European coffee brands and positions the company to compete against Nestle and Kraft Inc. (NASDAQ: KRFT), as well as Starbucks. D.E. Master Blenders also makes single-cup pods for Nespresso machines.
First coffee shops, then a major coffee supplier. What’s next? The opportunity to make a serious run for the top spot in the European coffee market is in JAB’s hands. Starbucks is surely paying attention to JAB and its moves in Europe. The Seattle firm is going to have to step up its game now that a new, well-funded player has joined the fray.