When seemingly everyone is making positive predictions about a product, a company, an industry, or a market, extreme caution is warranted. Consistently optimistic growth forecasts have often turned out to be a counter-indicator. This now threatens the coffee market, which until recently market researchers and analysts had been predicting a golden future for. The growing focus of diversified food manufacturers on hot beverages, and numerous M&A transactions, seemed to underscore that view. But the glossy picture has started to fade. Sharp increases in raw coffee prices and global trade conflicts have clouded the outlook for the beverage. Is it an indication of an industry downturn that the German Reimann family of entrepreneurs is withdrawing almost entirely from the coffee business through an M&A transaction?

US beverage group Keurig Dr Pepper recently announced the acquisition of Amsterdam-listed coffee giant JDE Peet’s (Jacobs, Café Hag, Senseo, Tassimo, etc.) for 15.7 billion euros. The Reimann family has stakes in both companies: in Keurig Dr Pepper – after gradually selling off shares in recent years – only about 4%, while in JDE Peet’s they still hold roughly 68% through their holding company JAB. For this controlling majority, the major shareholder is expected to receive around 10 billion euros. Both stakes are key assets in the Reimanns’ global portfolio, which also includes cosmetics and perfume manufacturers. In addition, investment firm JAB is currently expanding its business with veterinary clinics and pet insurance.

Following the merger of Keurig Dr Pepper and JDE Peet’s, the beverage and coffee divisions will be separated, with the „Global Coffee“ unit generating pro forma revenues of 16 billion dollars – roughly 50% larger than „Beverage.“ Both companies, in which the Reimanns will then each hold around 5%, are to be listed in the United States.

„Global Coffee“ would become the world’s largest pure coffee company and could more easily challenge market leader Nestlé (Nescafé, Nespresso, Caro, etc.). The Swiss food giant views coffee as one of its strongest growth segments, even if the statement made by ousted CEO Mark Schneider a year ago – „We have defined four growth areas: coffee, pet food, baby food, and water. In exactly that order.“ – is no longer being repeated. Schneider’s dismissal was partly driven by his acquisitions of small companies offering trendy coffee specialties at high multiples, which then apparently failed to perform as expected.

Among the segments with which Nestlé still aims to achieve above-average growth is the pet business – an area the Reimann family is now also investing in. Recent studies show that consumers have been cutting back on spending for their pets less than in other areas; in fact, budget cuts are more likely to affect spending on toddlers.

Like other coffee providers, Nestlé, JDE Peet’s, and Keurig Dr Pepper – as well as German roasters such as Tchibo, Dallmayr, Melitta, and Darboven – are being burdened by rising raw coffee prices. There are several reasons for this, including weather-related crop failures and noticeably tougher competition in procurement. Demand from India and China – which together account for 35% of the world’s population – is increasing, driving up costs. A special situation has also emerged in the Americas: earlier this month, US President Donald Trump imposed a 50% import tariff on coffee beans from Brazil, which is likely to push coffee prices even higher. However, compared to other world regions, producers will be even less able to pass on the higher costs fully to consumers through price increases. As a result, the profit margins of coffee producers are set to come under pressure.

The Reimann family may have exited the coffee business close to the peak of positive growth and return expectations – much like the Viessmann family did with its dominant heating and climate technology division during the heat pump hype. The deal could thus also mark the starting point for a reshaping of the US beverage sector and the global coffee industry.