Kraft Heinz considers options for Maxwell House, including sale
- Kraft Heinz is working with an investment bank to explore options for its Maxwell House coffee business, which could include a sale, CNBC reported.
- The business network said the brand had about $400 million in earnings before interest, taxes, depreciation and amortization. CNBC said Maxwell House could receive at least $3 billion in a sale, citing people familiar with the matter, though the eventual figure will depend on overall interest.
- The individuals said a sale of the brand would likely be one in a series of divestitures for Kraft Heinz as its portfolio has been exposed to the shift in changing consumer tastes and preferences.
The potential sale of Maxwell House comes just days after the food giant dropped a bombshell. Last week, the maker of Jell-O, ketchup, hot dogs and cold cuts shocked the market by disclosing an investigation into its procurement accounting policies by the Securities and Exchange Commission and a write-down of $15.4 billion in the value of its Kraft and Oscar Mayer brands.
The decision to unload the storied Maxwell House brand — synonymous for its "Good to the last drop" slogan —could generate a huge cash windfall that Kraft Heinz could use to pay down debt, purchase companies more in tune with today's trends or invest into refreshing other brands that have fallen out of favor with consumers. CNBC, citing sources, said the divestiture of Maxwell House could be the first in a series that might include Planters nuts, Oscar Mayer meat or Kraft Heinz's frozen food business.
While Maxwell House once dominated the market with Folgers and a handful of other brands, it has been impacted by shopper interest in more premium, fresher and better-tasting products.
Coffee in general remains popular with consumers looking for their morning buzz or a healthier pick-me-up throughout the day. Though Maxwell House is a time-honored brand, it may appear outdated compared to other options on the market. Other storied coffee brands, many of which are owned by J.M Smucker, are also seeing declines, despite coffee's resurgence with consumers. Smucker's coffee sales during its most recent quarter dipped 1% to $544.9 million.
Coffee has become a trendy acquisition. Nestlé, which had for years defined its presence in coffee with Nescafé, Taster's Choice and Nespresso, has bulked up its presence in the premium side by acquiring a stake in popular coffee shop chain Blue Bottle, paying $7.15 billion to sell Starbucks-branded coffee products at retail and snapping up Chameleon Cold-Brew. Last year, Smucker debuted 1850, a new line of premium coffees geared toward millennials and longtime Folgers customers that plays up the brand's connection to the California Gold Rush. And Coca-Cola entered into the space by purchasing Costa Coffee from U.K. drinks and hotels group Whitbread for $5.1 billion.
It's uncertain who, if anyone, will want to purchase Maxwell House. Despite its challenges, it's a legacy brand that still generates millions in sales and dependable profits annually. This could make it an attractive target for a private equity group. It's also possible that even though it's not a premium brand, Nestlé could be interested in adding Maxwell House to its burgeoning coffee empire.
Another potential target might be JAB Holding Company, which owns or has significant stakes in Keurig Dr Pepper, Peet's Coffee, Caribou Coffee and Stumptown Coffee Roasters. The portion of the German family-owned company that owns coffee brands said earlier this month it plans an IPO in the next couple of years.
After last week's stunning announcements, Kraft Heinz is aware that its long-held beliefs about the popularity and resiliency of its brands in the face of today's food climate were flawed, especially if the company was reluctant to invest enough in their products to keep them relevant. The mega-company no doubt hopes another buyer is willing to purchase Maxwell House in exchange for cash to help its overall business and keep drinkers of the well-known coffee brand from fleeing to other, more premium brews.
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