Second and Third Largest Coffee Firms Merge to Challenge Nestlé

The global coffee industry has long been dominated by Nestlé—but now, the number two and three players are joining forces to mount a serious challenge. On May 7, 2014, Mondelez International (formerly part of Kraft Foods) announced it would spin off its coffee business and merge it with the Netherlands-based D.E Master Blenders 1753 B.V., creating a new company dedicated solely to coffee. This strategic move isn’t just about consolidation; it’s a direct attempt to shift the balance of power in the $810 billion global coffee market.

Yes, the newly formed Jacobs Douwe Egberts (JDE) will still be smaller than Nestlé—but the combined entity will have an annual revenue of around $7 billion, making it the world’s largest pure-play coffee company. Mondelez retains 49% equity and will receive $5 billion in compensation, ensuring it benefits from future growth without full operational control. The deal is expected to close in 2015 pending regulatory approval.

Why This Merger Matters

The global coffee market is massive—approximately $810 billion—and Nestlé has long sat at the top. For years, the Swiss giant has led in both retail and B2B segments, with iconic brands like Nescafé and Nespresso. Mondelez, meanwhile, has been the number two player with brands such as Maxwell House and Gevalia, while D.E Master Blenders 1753 (home to Senseo and Jacobs) held the number three spot. Together, Mondelez and D.E Master Blenders 1753 generated $39 billion and $34 billion in coffee revenue respectively in 2013. Their merger creates a single entity with nearly $73 billion in combined coffee-related turnover, narrowing the gap with Nestlé significantly.

How the New Company Will Work

The new company, Jacobs Douwe Egberts, will be headquartered in the Netherlands. D.E Master Blenders 1753 will hold a 51% controlling stake, while Mondelez will own 49%. In exchange for relinquishing majority control, Mondelez will receive a cash compensation of $5 billion. The merged entity will focus exclusively on coffee, streamlining operations and leveraging the strengths of both companies’ portfolios. This includes Mondelez’s strong presence in North America and key international markets, along with D.E Master Blenders 1753’s expertise in European and specialty coffee segments. The goal is to create a more agile, competitive force capable of taking on Nestlé’s dominance.

What This Means for the Global Market

Despite the merger, the combined JDE will still trail Nestlé in overall coffee revenue. However, industry insiders suggest the new company will be better positioned to compete directly with the Swiss giant. Mondelez’s China representative noted that while the combined market share remains below Nestlé’s, “we can finally compete with Nestlé.” This is particularly significant in markets like China, where Mondelez’s Maxwell House brand has been a key player. The merger also signals a broader trend toward consolidation in the coffee industry, as major players seek to consolidate resources, reduce competition, and capture greater market share in a rapidly evolving global market.

Frequently Asked Questions

Which companies are merging to form Jacobs Douwe Egberts?

Mondelez International (formerly Kraft Foods) is spinning off its coffee business and merging it with D.E Master Blenders 1753 B.V. to form Jacobs Douwe Egberts. D.E Master Blenders 1753 holds 51% of the new company, while Mondelez retains 49%.

How big will the new coffee company be?

The new company, Jacobs Douwe Egberts, is expected to have an annual revenue of around $7 billion, combining Mondelez’s $39 billion and D.E Master Blenders 1753’s $34 billion in 2013 coffee revenues. This makes it the world’s largest pure-play coffee company, though still smaller than Nestlé.

When is the merger expected to be completed?

The merger is expected to be completed in 2015, pending regulatory approvals. Until then, both companies will continue operating independently.

Will Mondelez still be involved in the coffee business after the merger?

Yes, Mondelez will retain a 49% stake in the new company and will receive $5 billion in compensation. It will no longer operate its coffee business directly but will benefit from the growth and profits of Jacobs Douwe Egberts.

How does this merger affect Nestlé’s position in the coffee market?

While the new company will still be smaller than Nestlé, the merger creates a stronger competitor with a more focused coffee portfolio. Industry observers believe this could challenge Nestlé’s long-standing dominance in the global coffee market.

What are the key coffee brands involved in this merger?

The merger combines Mondelez’s brands like Maxwell House and Gevalia with D.E Master Blenders 1753’s brands such as Jacobs and Senseo. These brands will now operate under the Jacobs Douwe Egberts umbrella.

Recommended FrontStreet Coffee for Blended Pairings

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