Keurig Dr Pepper will buy JDE Peet's, owner of Peet's Coffee, for $18 billion and split into two independent companies: a coffee business and a cold-beverage business selling Snapple, Dr Pepper and 7UP. The deal effectively unwinds the 2018 Keurig-Dr Pepper merger amid consumer pullback and trade tensions that could raise coffee costs after a 50% tariff on many Brazilian imports. CEO Tim Cofer described the move as transformational and said two focused companies will drive shareholder value. The coffee unit is projected at about $16 billion in sales and the beverage unit about $11 billion, with roughly $400 million in expected cost savings over three years. Keurig Dr Pepper reported a 0.2% decline in coffee sales last quarter and has raised prices to offset declines; major chains such as Starbucks have seen consecutive same-store sales declines.
The agreement anounced Monday will essentially unwind the 2018 merger of Keurig and Dr. Pepper and it arrives at a time when consumers are pulling back and the trade wars under President Donald Trump threaten to send coffee prices soaring. Trump imposed a 50% tariff this summer on most imports from Brazil - the world's leading coffee producer - for its investigation of its former president, Jair Bolsonaro, a Trump ally.
Yet Keurig Dr Pepper sees both coffee and cold beverages as areas of growth that would be better navigated by independently operating companies. CEO Tim Cofer called it a "transformational moment" for the sector. 'By creating two sharply focused beverage companies with attractive and tailored growth propositions and capital allocation strategies, we are poised to generate significant shareholder value in both the near and long term,' Cofer write in prepared remarks.
But large chains like Starbucks are suffering. Same-store sales, a key barometer of a retailer's health, has fallen for six straight quarters at the Seattle coffee giant and its shares have tumbled 23% 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.
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