After six years of acquisitions, JAB Holding Co. has become one of the most powerful companies you’ve never heard of, cornering a substantial chunk of the world coffee market. Chairman Bart Becht’s retirement announcement this week came as a surprise to observers of the company, which operates as a private wealth vehicle for a billionaire German family.
With Peter Harf and Olivier Goudet, Becht was part of a triumvirate of senior partners that led JAB’s aggressive investment strategy. Becht gave up his chairman post of beauty conglomerate Coty to Harf back in November; he will also take over the JAB chairman post after Becht’s departure.
"After almost 40 years in the branded consumer business, I have decided it is time to refocus my activities and retire,” Becht said in a statement. “It has been a tremendous privilege and pleasure to work with JAB and the many people within its portfolio companies and I wish them continued success.”
But the Financial Times reports Becht stepped down after failing to convince the other partners to scale back JAB’s takeovers and instead focus on operational improvements for its portfolio companies.
Four members of the media-shy Reimann family have invested almost their entire fortunes in JAB, but the Germans are remarkably hands-off with their investment, letting the three senior partners guide the ship from Luxembourg since 2012. JAB has seen incredible growth since that time, with the senior partners completing $49.5 billion (€43.3 billion) in acquisition deals. The Reimanns hold 90 percent of JAB, with the remainder owned by the management.
“Private companies that manage a successful acquisition-led growth on JAB’s scale are as rare as hen’s teeth because takeovers so often result in a destruction of shareholder value, while the debt that fuels a deal spree remains stubbornly high,” David Fickling writes at Bloomberg Opinion. But JAB has impressively maintained debt in proportion to shareholder equity and holds portfolio companies for decades.
How JAB went from chemicals to coffee
JAB is named after Johann A. Benckiser, who founded an eponymous industrial chemicals company in the 1850s with chemist Karl Ludwig Reimann. The latter’s nephew, Albert Reimann, took control of the company in the 1930s, and in the 1950s the company branched out into household products.
In the 1980s Benckiser expanded dramatically, buying up foreign household product brands, led by Harf. The company that was renamed as JAB acquired Coty from Pfizer for $440 million in 1992.
Becht guided the merger of Benckiser with the British firm Reckitt & Coleman in 1999, turning Reckitt Benckiser into one of the world’s most profitable consumer goods suppliers. JAB controls a bit less than 7 percent of Reckitt Benckiser. It posted £11.5 billion ($14.8 billion) in revenue in its most recent fiscal year; for comparison, Unilever posted $60.5 billion and Procter & Gamble $66.2 billion. A further expansion into the beauty business was thwarted when a $10 billion offer to take over Avon failed in 2012. And that’s when JAB decided to focus on another evergreen industry: coffee.
“The world of coffee and tea is still not fully consolidated, and neither is the beauty business. You don’t have to be an Einstein to find acquisitions,” Becht told Handelsblatt last year.
On a buying spree
Since 2012, JAB has become the second-largest coffee company in the world after Nestle, acquiring Pret a Manger, Panera, Keurig, Peet’s Coffee and Krispy Kreme Doughnuts for billions and billions of dollars. But Nestle isn’t giving up the fight yet: Last year it won world licensing rights for Starbucks products for $7.15 billion, boosting its share of the US coffee market.
Meanwhile, Coty, of which JAB controls about a third, has been struggling since it took on a $12.5 billion package of 43 brands from Procter & Gamble in 2017. According to the Financial Times, Goudet was pushing for more acquisitions, and his working relationship with Becht had become strained.
It’s going to take three executives to replace Becht. Fabien Simon of France will become the CFO of JAB, after spending four years at portfolio company Jacobs Douwe Egberts and 14 years at Mars before that. Ricardo Rittes of Brazil, who will oversee emerging markets and open a new JAB office in Sao Paolo, spent 14 years at Anheuser Busch Inbev. Jacek Szarzynski of Poland will oversee the new Pret Panera Holding Co. after a 24-year career at Mars.
Grace Dobush is an editor with Handelsblatt Today in Berlin. Christoph Kapalschinski of Handelsblatt contributed to this story. To contact the author: [email protected]