Coffee giants Jacobs Douwe Egberts, Peet's plan to merge and go public

Dive Brief:

German-based JAB Holdings, which owns both California-based Peet's Coffee and Netherlands-based Jacobs Douwe Egberts, said it is merging the two beverage brands and considering taking the combined company public in 2020, according to a press release. JAB said it intends to remain the controlling shareholder after an IPO.
Peet's Coffee CEO Casey Keller will become CEO of JDE Peet's effective January 2020.
The company plans to raise $3.4 billion ahead of its IPO, which may be in Amsterdam, according to Financial Times reporting shared by Restaurant Business.

Dive Insight:

Peet's has been on a buying spree over the past few years, gobbling up Stumptown and Intelligentsia, while parent JAB Holdings has also acquired non-coffee chains like Caribou Coffee, Krispy Kreme, Einstein Bros., Pret A Manger and Panera.

As the coffee space continues to grow at an expected CAGR of 4.5% through 2023, the market has some room for more competition, and JDE Peet's would be well positioned to take significant share. Such a merger would create a coffee giant that annually generates about $7.8 billion in revenue, according to Restaurant Business.

For context, Dunkin' raked in $8.8 billion in annual sales last year, while Starbucks landed $19.6 billion in sales, so JDE Peet's would still have some significant catching up to do to in the U.S. be a viable competitor.

Jacobs Douwe Egberts could add some premium muscle to Peet's Coffee lineup, having just launched a White Ox bean blend, for example. It would also add a significant global presence and a deep legacy. Jacobs Douwe Egberts was founded more than 265 years ago and its coffee and tea brands exists in over 140 countries. Simultaneously, Peet's, with nearly 240 retail locations in the U.S. as of Nov. 26, would bring more exposure of the brand to the domestic market.

Notably, this IPO plan comes at a fragile time for JAB. In January, one of its managing partners left over a strategy disagreement and one of its oldest investments, beauty company Coty, has struggled.

It also comes as M&A remains strong, offering a viable path to market share growth in an intensely competitive environment. The fact that JDE Peet's is eyeing a public offering is somewhat against the general trend right now, however, which is driven heavily by private equity. A handful of restaurants have been making moves to go public, including TGI Fridays, which plans to go public after the completion of its sale to Allegro Merger. For JDE Peet's, it will be interesting to see how the newly combined company will perform, especially since coffee is its core competency.