J.M. Smucker Co. to Tackle Foodservice at Retail

Purchases Sara Lee’s Foodservice Coffee and Tea Ops

Published in CSP Daily News

DOWNERS GROVE, Ill. & ORRVILLE, Ohio -- The J.M. Smucker Co. will take a bold and large step into the coffee foodservice business with its purchase of a majority of Sara Lee Corp.’s North American foodservice coffee and tea operations.

"This transaction further strengthens our position as a leading North American coffee company," said Richard Smucker, chief executive officer of J.M. Smucker Co. "The addition of liquid-coffee concentrate to the Smucker portfolio aligns with our desire to compete in all forms of coffee, adding to our roast and ground, single-serve, instant and ready-to-drink platforms. The innovation partnership further allows us to collaborate on new technologies in the liquid-coffee category for the foodservice market."

The two companies announced the deal worth $350 million yesterday, as reported in a CSP Daily News Flash. The transaction is expected to close near the beginning of calendar year 2012. The two companies will also establish a long-term partnership to collaborate on liquid-coffee innovation.

"In recent years, our North American coffee business has been foodservice-based and largely unbranded, which is a challenge in a highly competitive marketplace," said Jan Bennink, executive chairman of the board for Sara Lee Corp. "Our decision to sell a major part of this business to Smucker is an example of Sara Lee Coffee and Tea's renewed focus on sustainable, profitable growth and part of our mandate to create the strongest possible pure-play company."

The acquisition includes Sara Lee's market-leading liquid coffee concentrate business sold under the licensed Douwe Egberts brand, along with a variety of roast and ground coffee, cappuccino, tea and cocoa products, sold through foodservice channels in North America.

"This enabling acquisition adds significant scale to our foodservice business," said Steven Oakland, president of International, Foodservice and Natural Foods, for J.M. Smuckers Co. "The transaction nearly doubles the size of our foodservice business, provides new coffee technologies, and adds a foodservice coffee direct sales force to our team, ultimately allowing us to extend our reach and enhance our relevance within away-from-home channels."

Smucker, which owns the leading U.S. coffee brand Folgers, and Sara Lee have also entered into a licensing agreement to cooperatively develop liquid-coffee technologies to drive long-term growth, said Bennink. “We look forward to working with Smucker and to the promising future of our new pure-play coffee and tea company."

As a result of the licensing and support agreement, Sara Lee will receive a 10-year income stream totaling approximately $50 million, plus growth-related royalties, which will help cover its research and development and other support expenses.

The North American foodservice-beverage business currently employs approximately 690 people. In fiscal 2011, the foodservice-beverage business generated net sales of approximately $530 million, of which approximately $285 million was associated with the assets sold to the J.M. Smucker Co. Following the execution of the agreement, approximately 450 people will transfer to the J.M. Smucker Co.

The company also announced that Senseo coffee in North America will be discontinued as of March 31, 2012, with the exception of select online channels. Sara Lee plans to sell or close the remaining assets of the North American coffee business, and expects to provide an update on the process before the end of calendar year 2011.

Downers Grove, Ill.-based Sara Lee’s portfolio of products include products and brands from Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Sara Lee and Senseo.

The J. M. Smucker Co., Orrville, Ohio, is a leading marketer and manufacturer of fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages in North America. Its family of brands includes Smucker's, Folgers, Dunkin' Donuts, Jif, Crisco, Pillsbury, Eagle Brand, R.W. Knudsen Family, Hungry Jack, Cafe Bustelo, Cafe Pilon, White Lily and Martha White.

Keywords: 
coffee, financial