Keurig Dr. Pepper to acquire Peet’s in $18 Billion deal

Keurig Dr Pepper said Monday that it would acquire European coffee company JDE Peet’s for roughly $18 billion in the latest megadeal by food companies trying to stay a step ahead of changes in consumer demand.

After completing the all-cash acquisition, Keurig Dr Pepper plans to combine its coffee business, which includes its namesake single-serve coffee pods, with JDE Peet’s and spin it into a new company. The remaining beverage business would include brands like Dr Pepper, Snapple and 7UP.

The two-step transaction is aimed at effectively undoing the multibillion-dollar combination of Keurig and Dr Pepper announced in 2018. That deal was meant to create a beverage giant with the capacity to distribute hot and cold drinks to customers while saving money.

But in the past several years, the coffee industry has slowed significantly, amid surging coffee bean prices, softening demand and stiff competition from cheaper store brands. As a result, the coffee business has become a drag for Keurig Dr Pepper.

The deal with JDE Peet’s would create “two sharply focused beverage companies with attractive and tailored growth propositions,” Timothy Cofer, CEO of Keurig Dr Pepper, said in a statement. Rafa Oliveira, CEO of JDE Peet’s, said the deal signaled “a new era of coffee innovation.”

The new coffee company, with roughly $16 billion in annual sales, will have headquarters in Burlington, Massachusetts, with international headquarters in Amsterdam. The beverage business, with about $11 billion in annual sales, will be based in Frisco, Texas.

Keurig Dr Pepper said the deal, which would need to be approved by shareholders and regulators, was expected to be completed in the first half of 2026. If the deal breaks down, JDE Peet’s will owe Keurig Dr Pepper a termination fee of more than $180 million.

A number of food companies have announced or considered deals in recent years, mixing and matching their brands and business lines.

In the fall of 2023, Kellogg spun out its increasingly popular snacks like Pringles and Cheez-It crackers into a new company, Kellanova, and shifted its underperforming cereal business, which includes brands like Froot Loops and Rice Krispies, into WK Kellogg. Last August, candy giant Mars agreed to buy Kellanova in a deal valued at nearly $36 billion and, in July, Italian candy company Ferrero said it would acquire WK Kellogg in a $3.1 billion deal.

Kraft Heinz, a behemoth with $26 billion in annual revenue and a portfolio of condiment, lunch meats and frozen potato brands, has been weighing its own deal to break up a merger announced in 2015.

Cofer warned during a call with analysts last month that it expected the company’s coffee business to remain “subdued” because of the effects of inflation, tariffs and consumer uncertainty. Sales at its U.S. coffee division declined slightly in the quarter that ended June 30, to $948 million.

Droughts in Brazil and Vietnam, two of the biggest coffee exporters in the world, have resulted in smaller harvests and driven up prices. On top of that, President Donald Trump imposed a 50% tariff this month on coffee imported from Brazil.

Consumers are paying significantly more for their caffeine fixes than they did a year ago. At the end of July, the average price of 1 pound of ground roast coffee in the U.S. was $8.41, up 33% from a year earlier, according to the Bureau of Labor Statistics.

Keurig Dr Pepper’s soda business, in contrast, has done extremely well with the sale of flavors like cherry, cream soda and blackberry. In the latest quarter, sales in its beverage division surged 10.5%, to $2.7 billion, from a year earlier.

Based in the Netherlands, JDE Peet’s has cobbled together nearly 50 coffee and tea brands from all over the world, including L’Or from France, Jacobs coffee from Germany and Ti Ora tea from New Zealand. In the first half of this year, sales at JDE Peet’s rose 19.8%, to just under $6 billion, largely because of price increases.

Oliveira told analysts in July that JDE Peet’s was better positioned than many of its American competitors to weather the impact of tariffs, because less than 30% of coffee it uses comes from Brazil.

Executives also said the company was looking to simplify its portfolio, divesting some units and focusing on a smaller number of brands they believed were best placed “to meet both current and emerging consumer needs.”

Cofer will become CEO of the beverage business, and Sudhanshu Priyadarshi, Keurig Dr Pepper’s chief financial officer, will lead the new coffee business.

This article originally appeared in The New York Times.