What JAB Holding's IPO plans mean for Starbucks
- Germany-based JAB Holding Co., which owns several restaurant brands including Panera, Pret A Manger and Krispy Kreme, is planning to bring its Acorn Holdings business public in the next two to three years, Reuters reports. Acorn is JAB’s global coffee and beverages platform and includes Peet’s Coffee, Stumptown Roasters, Intelligentsia and Keuirg Dr Pepper.
- An IPO would add billions of euros to the company’s coffee business, which would allow executives to better compete with market leader Nestle, a major objective for the company.
- The U.S. coffee market increased by nearly 4% in 2018 and is expected to continue growing at a CAGR of 2.8% through 2023.
Reuters reports that the Acorn business generated annual sales of $19 billion. This is compared to JAB’s restaurant business, which generated $5.7 billion. With a $13.3 billion difference in sales between JAB’s coffee and restaurant portfolios, it’s no wonder the company is focusing on expanding the former with a potential IPO.
CB Insights outlines JAB’s acquisition spree in the coffee space, starting with its purchase of Peet’s in 2012 — the holding company’s debut in coffee. Peet’s has more than 240 locations and a strong ready-to-drink presence in more than 15,000 grocery stores.
Peet’s has since made some acquisitions of its own — including both Stumptown and Intelligentsia in 2015 and Revive Kombucha in 2017. The former two brands focus on artisanal coffee and transparent sourcing, according to CB Insights, posing a small threat to two of Starbucks' differentiators. Late last year, Starbucks also jumped into the growing kombucha category through its Evolution Fresh line, which is available at retailers and grocery stores.
JAB has also added Caribou Coffee, which has more than 400 shops, among a number of other coffee companies to its portfolio — essentially building an international coffee empire throughout the past few years through consolidation. An IPO would more than likely accelerate its growth and perhaps pose a bigger threat to Starbucks. Last year, Nestle bought the rights to sell Starbucks retail products, spending more than $7 billion. However, JAB has a long way to go to catch up to Starbucks’ ready-to-drink portfolio, which currently makes up about 88% of market share.
Still, on the coffee shop side of its business, Starbucks has shown a little bit of vulnerability within the past year, which has affected investor confidence in the brand. Starbucks has perhaps been a victim of its own success, struggling with — among other things — oversaturation, and the company has plans to close about 150 locations this year. Starbucks’ saturation has also caused an erosion of traffic, opening the door for competitors to pounce. JAB isn’t the only company poised to do so; Luckin Coffee is also reportedly eyeing a U.S. IPO, while Dunkin’ has invested $100 million in its U.S. business, which includes an intensified focus on its lattes and espressos. With or without a JAB IPO, expect Starbucks to have more competition to contend with than ever.
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