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Smucker to Buy Most of Sara Lee North American Coffee

10/26/2011

J. M. Smucker Co., Orrville, Ohio, on Oct. 24 announced the signing of a definitive agreement to acquire a majority of the North American foodservice coffee and hot beverage business of Sara Lee Corp., Downers Grove, Ill. Smucker is to pay about $350 million in cash.

The acquisition includes Sara Lee’s “market-leading” liquid coffee concentrate business, sold under the licensed Douwe Egberts brand. “Liquid coffee concentrate adds a unique and technology-driven form of coffee to [our] existing foodservice product offering,” Smucker officials said.

The companies agreed to collaborate on liquid coffee technology by entering into a long-term foodservice innovation partnership. Sara Lee officials said that should mean a 10-year income stream totaling approximately $50 million, plus growth-related royalties.

Included in the sale is a variety of roast and ground coffees, cappuccino, tea and cocoa products, all sold through foodservice channels in North America. “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, Sara Lee’s executive chairman of the board.

One piece that’s not included is Sara Lee’s Senseo business in North America. The maker of single-serve coffee pods and their machines 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 before the end of this year.

The acquisition is expected to add annual sales of approximately $285 million to Smucker. “This transaction further strengthens our position as a leading North American coffee company,” said CEO Richard Smucker. Smucker already owns the Folgers and Café Bustelo brands and licenses Dunkin’ Donuts. Officials also noted the deal nearly doubles the size of Smucker’s foodservice business.

It also will add to the company approximately 450 employees in the U.S., Canada and Mexico; a liquid coffee manufacturing facility in Suffolk, Va.; a leased roast and ground coffee manufacturing facility in Harahan, La.; and coffee equipment and service teams located throughout North America. In addition to licensing the Douwe Egberts brand, Smucker also will license the Cafitesse and Pickwick brands.

Sara Lee continues to pare nonstrategic holdings as it prepares for an early 2012 split into a North American deli meat business that includes the Jimmy Dean and Hillshire Farms brands and an international coffee and tea business.