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Can someone please tell the JAB Holding Company that the coffee industry isn’t just a big game of Katamari Damacy, because they seem dead set on rolling through every coffee company until they’ve created some sort of Frankenstein’s monster coffee star. The Luxembourg-based investment firm has already swallowed up big time coffee brands like Peet’s, Stumptown, Intelligentsia, Caribou, Keurig, and Pret A Manger, and now they have turned a lustful gaze at one of the largest independent coffee companies left: Illy.
But there’s another player, a cousin of Prince JAB to keep the Katametaphor going, with interest in the 85-year-old coffee company, none other than Nestlé.
According to Bloomberg, the Swiss company is looking to add to their coffee portfolio that includes homegrown brands Nescafé and Nespresso as well as acquired entities like Blue Bottle and the rights to market Starbucks products. But neither Nestlé or JAB are going to have an easy time adding to their collection as Illy Chairman Andrea Illy has stated that, “Every hypothesis of corporate agreements has been deemed inappropriate.” For now.
Were a sale to occur (and let’s be honest, it’s probably going to happen, right?), financial experts believe the bidding would start at a cool $1.6 billion, roughly three times Illy’s yearly revenue based on 2016 earnings.
Illy’s market share in the coffee space has stagnated at around .2 percent since 2008, whereas Italian competitor Lavazza has increased from 2 to 2.5 percent in that same time frame thanks to acquisitions like that of French brand Carte Noir. Experts believe that this stagnation—along with the acquisitions happening all around them—will make it harder and harder for Illy carve out their own space in the coffee industry:
“It’s tougher and tougher to compete without growing. As the market consolidates around you, staying the size of an Illy or even a Lavazza becomes more difficult,” Jim Watson, a senior beverages analyst at Rabobank International, said. “As they all get bigger, and even as Lavazza gets bigger, it definitely puts Illy’s place at risk.”
For now, Illy remains independent. One would think that $539 million in annual revenue across 140 countries would insulate a company from talks about not being able to compete in a global market and acquisitions. But that’s just not the case in the current coffee marketplace, where power is quickly consolidating around only a handful of brands (with a few new players trying to gain ground). It seems if you want to be a multi-national independent coffee company nowadays, you need to turn those M’s to B’s.
Top image via AWS Productions.
Disclosure: Blue Bottle, Intelligentsia, and Stumptown are advertising partners of the Sprudge Media Network.
Read more: sprudge.com