Investors Bet $1 Billion on Tea Retail

Retail News

LOS ANGELES, Calif. – Investments, mergers and acquisitions fueling tea retail during the past 18 months reached an unprecedented $1 billion.

Remarkably, investments in coffee retail during this same period top $10 billion.

LOGO-CoffeeBean&TeaLeaf_240pxThe latest move is a sizable (but undisclosed) investment in California-based Coffee Bean & Tea Leaf. The deal was disclosed Friday by a consortium led by private-equity firm Advent International in Boston and CDIB Capital (the overseas investment arm of Taiwan-based China Development Financial Holdings Corp.) along with Mirae Asset Private Equity, a Korean venture.

The privately held Coffee Bean & Tea Leaf was founded in 1963 and has a large-scale tea blending facility in Camarillo, Calif. The company owns 178 stores and franchises 764 stores in 30 countries with 250 in Korea. It opened its first Asian store in 1996.

Victor Sassoon and his brother Sunny remain significant shareholders, according to a Sept. 12 release.

“Since 1996, we have worked very hard to build The Coffee Bean into the global and innovative company it has become today that touches the lives of millions of guests every week. The Coffee Bean & Tea Leaf® celebrates its 50th anniversary this year and we feel very blessed and excited to join our new partners in continuing to realize the Company’s significant potential as we look forward to the next 50 years of growth on all levels,” according to a joint statement by CBTL Executive Chairman Sunny Sassoon and Victor, who is CBTL CEO Asia.

The Coffee Bean is the largest independent global player in a dynamic industry,” said Jeff Case, a Principal at Advent International. “The coffee and tea market is poised for continued growth, driven by rising coffee consumption globally and an expanding middle class in Asia and other growing economies throughout the world. We believe this investment will serve to accelerate the brand’s development and market share and we look forward to working with the management team to accomplish that growth.”

Will Kussell, a member of Advent’s Operating Partner program, will serve as Vice Chairman of The Coffee Bean Board of Directors. Kussell was previously president and chief brand officer of Dunkin’ Donuts Worldwide where he led the successful repositioning of the company as a coffee and bakery segment leader, increasing U.S. sales from just over $1 billion in 1994 to more than $5 billion in 2009. He also established an international growth strategy for Dunkin’ Donuts that led to a 60% sales increase from 2004 to 2009.

CBTL President and Chief Executive Mel Elias told Nation’s Restaurant News “The brand was well accepted in Asia, in part because The Coffee Bean had long focused on premium tea in addition to coffee — offering a leg up in a part of the world that had yet to adopt coffee-drinking ways.

The brand’s emphasis on tea will also be an advantage in the U.S., where consumer interest in tea is booming, Elias said. “When I started about 15 years ago, tea was about 4 percent of sales. Now it’s 15 percent, and it’s our fastest growing category,” he told NRN reporter Lisa Jennings.

Coffee Retail Investments

CBTL (Private) – $undisclosed – Advent International (Sept. 2013)
Master Blenders 1753
(Public) – $9.8 billion – Joh. A. Benckiser Group (April 2013)
Caribou Coffee
(Public) – $350 million – Joh. A. Benckiser Group (Jan. 2013)
Peet’s Coffee & Tea
(Public) – $974 million Joh. A. Benckiser Group (July 2012)

JAB paid $73.50 a share, a 29 percent premium for Peet’s in July 2012 and $16 per share for Caribou, a 30 percent premium. The company then paid $9.8 billion or $16.71 a share for DE Master Blenders 1753, the largest coffee acquisition in history. Illinois-based Sara Lee Corp. became Hillshire Brands last year, spinning off its international coffee and tea business in June 2012 to create DE Master Blenders 1753. The previous high was the $3 billion paid by JM Smucker Co. for the Folger’s coffee brand which it purchased from Procter & Gamble Co. in June 2008.

Tea Retail Investments

T2 (Private) – $80 million est. Unilever (Sept. 2013) – See Tea Biz T2 Post
Teavana (Public) – $620 million Starbucks Coffee (Nov. 2012)
DAVIDsTEA
(Private) – $14 million (April 2012)

Tea represents at least 10 percent of sales at the coffee firms listed above with greater margin contribution than coffee. This means the Peet’s, CBTL and Caribou deals represent at least a $150 to $200 million investment in tea retail. Tea represents much less of the the Master Blenders portfolio includes Tea Forte and Pickwick Tea, a multi-million dollar brand with about 70 percent of the Dutch market and 12 percent of Europe’s tea sales. If you assume Unilever paid at least $80 million for Australia’s T2 the total investment in tea retail tops $1 billion. Unilever did not disclose what it paid for T2.

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