JAB on the DEMB takeover

In April this year, private global investment firm Joh A Benckiser (JAB) launched the coffee industry’s largest ever takeover bid, offering US$9.8 billion for the Dutch coffee giant D.E Master Blenders 1753 (DEMB). The bid valued DEMB at around US$17 per share and makes JAB, which had also spent roughly US$1 billion acquiring US retailers Caribou and Peet’s Coffee and Tea in 2012, the third largest coffee company in the world after Nestlé and Mondelez. The deal, which was approved in late September, has refocused the industry’s attention on DEMB, which just last year had returned to being an independent Dutch company after being spun off from US-based Sara Lee. For JAB’s Chairman Bart Becht, the motivation to pursue DEMB was clear cut.  “Coffee, for us, is an interesting category for one simple reason: it is a very steady business,” he tells Global Coffee Review. “Master Blenders is a good first entry. It’s a strong player and it’s a good platform for organic growth and potential acquisitions.” But as simple as the decision to acquire DEMB was, as Becht sees it the company has some challenges that it must address before it can realise its full potential. “I’m a very strong believer that you’re only as good as the product that you provide to your consumers – that in the long-term is what will make you successful. So making better and more interesting varieties is what Master Blenders is going to be about,” says Becht, who is now also DEMB’s Chairman. Becht says this will be achieved both by improving DEMB’s existing offerings “without necessarily increasing the price”, as well as coming up with new products to cater to the growing appetite for premium coffees in developed markets such as Western Europe.  Whatever changes are made at DEMB under JAB’s ownership, one can be assured that they will not be rushed. Becht says that JAB’s history shows that the company is only interested in medium to long-term investment opportunities. “Our focus is very much on consumer goods, and it is very long-term,” he says. “Typically 15 to 20 years is the minimum investment period.” Becht points to another of JAB’s brands, Coty Cosmetics, as an indicator of this approach. JAB bought Coty, which owns brands such as Davidoff Parfums and Rimmel London, in the late 1980s, waiting until just this year to float a small percentage (around 10 per cent) of the company. With 250 years of history and a strong market position in Western Europe, Brazil, Australia and New Zealand, calling DEMB “a good first entry” may be something of an understatement, but that is not to say that it is not without its challenges. Since separating from Sara Lee, the road for DEMB has not been particularly smooth, and some 80 out of the company’s 120 top managers have been replaced in the past 12 months. “There needs to be some stabilisation taking place,” Becht says. “Our first job is to make it a strong, self-sustaining unit, because it was only spun-off from Sara Lee last year, so there’s still quite a lot of work to be done to make it a strong competitor in that category.” In order to achieve this, JAB has made a number of key appointments in senior roles. Chief among these is Pierre Laubies, who in September was announced as DEMB’s new Chief Executive Officer. Laubies comes to DEMB from Mars, where he ran the global pet care business, giving him experience in many countries of interest to DEMB, including Brazil.
With his extensive experience in the consumer products arena, it can be expected that Laubies has been hired to bring some big ideas, and new ways of doing things, to DEMB. But all of this, Becht says, can be encapsulated in a focus on the basics. “His vision for the company is to provide a great coffee experience for consumers. Coffee is a very emotional product for people, so we are very much working on making sure that no matter what time of the day people are drinking coffee that it’s a great experience,” he says. Other key figures to come over from Mars are Dutchman Jan van Bon, who has been made DEMB’s President Retail Developed Markets and Australian Fiona Hughes who is now Senior Vice President of Marketing. Swiss national Oliver Hasler has also joined as President of DE Professional (Out of Home), coming from food service business of Arc International. Becht says one of the key aspects of the business that he was attracted to is DEMB’s capacity for innovation. “They have fantastic technology and they know how to make fantastic coffee in just about every segment,” he says. While DEMB has a strong brand in the pods market with their Senseo coffee maker, Becht says that the company has an equally attractive opportunity in the capsule segment on the L’Or Espresso platform. However, while Becht sees the opportunity for innovation in the company’s future, in the early stages he says JAB is focused on ensuring that DEMB capitalises on its existing strengths. “Our core focus is to strengthen our position in the markets where we already have a presence before we start considering going into new ventures,” he says.
While there has been plenty of speculation about what JAB’s purchase of US retailers Caribou and Peet’s, as well as DEMB, says about their overall strategy in the sector, Becht says at present there are no plans to connect the businesses. “We have purposely kept Caribou and Peet’s separate from DEMB for a very simple reason: we believe that those businesses are very different, in terms of what is required to make them successful,” he says. Becht says that the fundamentals of the retail businesses – good real estate knowledge, strong training practices and excellent workforce management – are completely different to those required in consumer goods. “So we don’t think it’s a good idea to have the two areas managed by the same group,” he says. For now, Becht says, he is happy for DEMB to focus on doing what it does best. “We are very much looking at what are the best opportunities, considering the fantastic technologies that we have, and how we can best apply that to different segments in the countries that we operate in.”

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