Keurig Dr. Pepper (KDP) announced their plans to acquire JDE Peet’s in an approximately $18 billion deal. Less than a year after their acquisition of the energy drink company GHOST, this acquisition marks a major change in KDP’s business strategy. For starters, KDP is no more– Keurig Dr. Pepper has announced plans to separate their companies once again.

Reasons for Partnering

• KDP Split: KDP plans to split into separate entities, Keurig and Dr. Pepper, following the Peet’s acquisition. This will allow the businesses to focus on growth in their own markets, coffee and soda, respectively. Peet’s will be joining the Keurig side of KDP.

• Peet’s & Keurig: Together, Peet’s and Keurig will have a better chance in the highly competitive coffee market. As a standalone business, Keurig’s single-serve coffee machines and pre-packaged coffee cups aren’t able to stand up against coffee titans, such as Starbucks. Peet’s brings a global presence to Keurig’s North American customer base.

• Tariffs: President Trump employed a 50% tariff on many imports from Brazil, including coffee. This drastic increase could spell the end of smaller beverage companies utilizing Brazilian coffee beans in favor of cheaper alternatives, such as Colombian coffee. KDP’s acquisition of Peet’s and their $16 billion annual net sales may be enough to counteract the higher cost of Brazilian beans. 

Conclusion

This acquisition is projected to cause some major changes in the beverage industry. Since last year’s acquisition of GHOST, KDP has been trying to keep up with constantly changing consumer tastes. Post-split Dr. Pepper plans to focus on sodas, energy drinks, and even probiotic sodas with their explicit Bloom distribution deal. Keurig is likely to expand into a global market through their acquisition of Peet’s.

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