Sara Lee Sells Foodservice Coffee/Tea Unit to J.M. Smucker 2011-10-24

Sara Lee Corp. has announced the sale of a majority of its North American foodservice coffee and tea operations to The J.M. Smucker Company for $350 million. The transaction is expected to close near the beginning of calendar year 2012. The two companies will also establish a long-term partnership to collaborate on liquid coffee innovation.

The acquisition includes Sara Lee's market-leading liquid coffee concentrate business sold under the licensed Douwe Egberts brand, along with a variety of roast and ground coffee, cappuccino, tea, and cocoa products, sold through foodservice channels in North America.

"This transaction further strengthens our position as a leading North American coffee company," says Smucker CEO Richard Smucker. "The addition of liquid coffee concentrate to the Smucker portfolio aligns with our desire to compete in all forms of coffee, adding to our roast and ground, single serve, instant, and ready-to-drink platforms. The innovation partnership further allows us to collaborate on new technologies in the liquid coffee category for the foodservice market."

"This enabling acquisition adds significant scale to our foodservice business," adds Steven Oakland, president of International, Foodservice and Natural Foods for Smucker. "The transaction nearly doubles the size of our foodservice business, provides new coffee technologies, and adds a foodservice coffee direct sales force to our team, ultimately allowing us to extend our reach and enhance our relevance within away-from-home channels."

“In recent years, our North American coffee business has been Foodservice-based and largely unbranded, which is a challenge in a highly competitive marketplace,” says Jan Bennink, Sara Lee's executive chairman of the board. “Our decision to sell a major part of this business to Smucker is an example of Sara Lee Coffee and Tea's renewed focus on sustainable, profitable growth and part of our mandate to create the strongest possible pure-play company.”

As a result of the licensing and support agreement, Sara Lee will receive a 10-year income stream totaling approximately $50 million, plus growth-related royalties, which will help cover its research and development and other support expenses.

Sara Lee's North American foodservice beverage business generated net sales of approximately $530 million in 2011, of which approximately $285 million was associated with the assets sold to Smucker.

The company also announced that Senseo coffee in North America will be discontinued as of March 31, 2012, with the exception of select online channels. Sara Lee plans to sell or close the remaining assets of the North American coffee business and expects to provide an update on the process before the end of calendar year 2011.