This is why M&A in the coffee segment will only grow
U.S. consumers are not just hungry for quality food these days. They’re also thirsty for exceptional coffee. Premium coffee providers are attracting more attention from buyers than the mainstream brands because people are willing to pay more for high-quality coffee. JAB has been aggressive with acquisitions in the sector and Farmer Bros. is also looking to expand in the space.
Farmer Bros. Co. (Nasdaq: FARM) recently completed its $42 million acquisition of coffee roaster Boyd Coffee Co. Portland-based Boyd distributes coffee products to companies in the restaurants, hospitality, healthcare and convenience store sectors.
“We will add several premium coffee brands to our portfolio that can build upon our focus in the premium coffee segment,” Farmer Bros. CEO Mike Keown told investors. He added that the purchase is part of the company’s strategy of seeking acquisitions in the space. Northlake, Texas-based Farmer Bros. also sells coffee to restaurants and foodservice providers.
Other strategic buyers in food and beverage are also looking to brew more coffee. Nestlé is acquiring a majority stake in Blue Bottle Coffee, a U.S. manufacturer of coffee roast, for an undisclosed amount. The investment is intended to help the target open new cafes and roasteries. Blue Bottle began in 2002 as a home delivery business serving roasted coffee and now operates a chain of cafes. With the new investment, Blue Bottle plans to build a digital program serving international guests in more countries and expand the product line of consumer packaged goods. The target is slated to grow by 25 new cafes by the end of 2017, from the current 29, and enter three new markets including Boston, Miami and Washington, D.C.
JAB Holding Co., investment vehicle of Austria’s billionaire Reimann family, has been growing its coffee pantry through M&A. Along with Panera Bread, the company previously purchased Krispy Kreme Doughnuts, Peet’s Coffee & Tea, Stumptown Coffee Roasters and Intelligentsia Coffee.
Coffee drinkers are raising their standards and are not shy about spending more for a better taste. As they do, investors will pour money on first-rate roasters.