Keurig Dr Pepper is buying Peet’s and splitting into two companies

Keurig Dr Pepper yesterday agreed to buy Dutch coffee giant JDE Peet’s for $18.4 billion, marking the biggest European acquisition since 2023 and also ensuring that Peet will be a recurring guest on Keurig’s pod.

• Once the deal is complete, the company says it’ll combine Keurig and other coffee brands with Peet’s, then spin that off into the world’s largest pure-play coffee business.
• Its remaining standalone beverage business will include soda brands like Dr Pepper, Snapple, and 7UP, as well as energy drink brands like Bloom and Ghost.

Company officials say this two-step plan will effectively undo the multibillion-dollar combination of Keurig and Dr Pepper that occurred in 2018.

How we got here

In recent years, Keurig Dr Pepper has seen a tale of two beverages unfold:

• The company’s coffee division has lost steam, due in large part to droughts in Brazil and Vietnam—two of the biggest global coffee exporters—as well as a fresh round of US tariffs, including 50% on coffee imported from Brazil.
• On the other hand, its soda business has bubbled over with success. The company’s US beverage sales grew by ~11% last quarter on an annual basis, while Dr Pepper recently overtook Pepsi as the #2 overall soda in terms of US market share for the first time ever.

Grounds for growth: The acquisition of JDE Peet’s—parent company of Peet’s Coffee, Jacobs, Douwe Egberts, and other global coffee brands—is expected to boost Keurig Dr Pepper’s earnings and its geographical reach, as well as deliver ~$400 million in cost savings, CEO Tim Cofer said.

Zoom out: Volatility in the coffee industry means more moves are brewing. Kraft Heinz is reportedly planning a similar separation that would effectively undo the 2015 merger that created it. And Coca-Cola is exploring a sale of Costa Coffee, which the beverage giant purchased in 2018 for $5.1 billion.