* Group looks to grab chunk of $40 bln US coffee market
* Benckiser made up of former consumer products execs
* Green Mountain, D.E. Master Blenders could be targets
By Olivia Oran and Martinne Geller
NEW YORK, Dec 19 A relatively unknown German
holding company this week made its third move on a coffee
company as it tries to assemble a juggernaut that can challenge
chains like Starbucks Corp and Dunkin' Brands Group Inc
Monday's announcement by the tight-lipped private investment
firm Joh. A. Benckiser that it would buy Caribou Coffee Company
Inc for $340 million came less than two months after it
bought Peet's Coffee & Tea for $1 billion and raised its stake
in D.E. Master Blenders 1753 to 15 percent from about
Controlled by Germany's billionaire Reimann family, the
firm's holdings already include fragrance company Coty and
luxury brands Bally and Jimmy Choo. It is run by three consumer
products veterans with ties to giants such as Reckitt Benckiser
Group, candy giant Mars and Anheuser-Busch InBev
Bankers say the group is angling to become a powerhouse in
the global coffee business, which is being fueled by innovations
like single-serve brewers, new kinds of drinks and emerging
middle classes in developing markets.
"They're not trying to build a $5 billion business," said
one banker who has worked with JAB. "They're trying to build a
$25 billion business. These guys are empire builders."
In a nod to the world's largest brewer, formed by InBev's
$52 billion takeover of Anheuser-Busch in 2008, another banker
said the group "wants to be the InBev of coffee."
Of JAB's three partners -- Peter Harf, Bart Becht and
Olivier Goudet -- Harf and Goudet have served on the board of AB
InBev, maker of Budweiser and Stella Artois.
Harf, the chief executive, joined the firm in 1981. A former
colleague who knew Harf when he worked at Boston Consulting
Group described him as "decisive, hard charging, inventive and
"I'm not afraid of taking risks," Harf said in a profile on
the website of Harvard Business School where he studied after
earning a PhD from the University of Cologne. "I'm not afraid of
losing. I'm not afraid of buying something."
Harf is considered the senior statesman and spokesman of the
group, while Becht focuses on operations and Goudet on strategy,
according to a person who has worked with the three.
Becht, former CEO of household goods maker Reckitt
Benckiser, is from the Netherlands and known for being
"extremely smart, demanding and impatient," while Frenchman
Goudet, ex-finance chief of candy maker Mars, was "the driving
force" behind that company's $23 billion merger with Wrigley in
2008, said a person who has worked with many consumer goods
makers including those.
JAB also has a relationship with Chicago-based BDT Capital
Partners, founded by Byron Trott, a former senior Goldman Sachs
banker and long-time confidant of billionaire investor Warren
Buffett. Trott helped advise the Mars family during the Wrigley
deal where he worked closely with Goudet.
Trott's firm later advised JAB on Coty's $10.7 takeover bid
for U.S. cosmetics maker Avon Products earlier this
year. It was a minority investor in the Caribou and Peet's
HIGH MULTIPLES, GROWING FOOTPRINT
The company paid an earnings before interest, tax,
depreciation and amortization (EBITDA) multiple of roughly 21
times for Peet's, which is high compared to other consumer
deals. The median multiple for recent transactions in the food
and beverage space is roughly 10 times, according to Harris
Williams & Co.
Bankers who have worked with them say the partners don't shy
away from lofty price tags as they tend to view deals from a
long-term strategic perspective rather than a quick flip.
"They have big egos and big aspirations," said another
dealmaker who has worked with the group. "Price has never been
With the acquisitions of Peet's and Caribou, JAB is
consolidating the heavily fragmented $40 billion U.S. coffee
market dominated by Starbucks, McDonald's Corp and
Dunkin' and without other large or mid-size players.
JAB will soon have around 800 U.S. stores, which still pales
in comparison with more than 11,000 for Starbucks.
Coffee is a staple for U.S. consumers, with over 76 percent
reporting they have purchased the beverage in some form in the
last month, according to market research firm Mintel.
The moves also give the firm bagged coffee it can sell at
U.S. supermarkets and warehouse clubs, where margins tend to be
fatter. That pits it against other giants like Folgers, owned by
JM Smucker Co and Maxwell House, owned by Kraft Foods
"Coffee is viewed as an attractive market but it is
incredibly competitive at this point," said Morningstar analyst
Erin Lash. "There are tough competitors there that are focused
on growing their position."
But so is JAB. Bankers say it could look to merge with D.E.
Master Blenders, the coffee arm of the former Sara Lee, or Green
Mountain Coffee Roasters Inc, though they say the
recent rise of that company's stock price makes that move less
Green Mountain and D.E. Master Blenders declined to comment.
Industry sources see the group as a consolidator rather than
a brand-builder, so don't expect it to buy anything too small.
"We believe the coffee market is an attractive industry with
favorable long-term fundamentals, which is why we are in it,"
said Tom Johnson, speaking on behalf of JAB. None of the
partners were available for an interview.