Coffee Holding sees JAB's Keurig buyout as potential risk

Coffee Holding

27/01/2016 22:50

By Luc Cohen 
    NEW YORK, Jan 27 (Reuters) - Coffee Holding Co Inc  JVA.O , 
a New York-based coffee merchant and roaster, said major 
customer Keurig Green Mountain's  GMCR.O  plans to go private 
could put the two companies' decades-long relationship at risk. 
    Coffee Holding, a relatively small U.S. coffee importer, 
gets more than half its revenue from selling green, or 
unroasted, coffee beans to Keurig, the United States' leading 
single serve roaster, filings show. 
    "The risk is if they change their buying procedures and 
decide we're not part of the equation," Coffee Holding President 
and Chief Executive Andrew Gordon said in an email on Wednesday. 
    JAB Holding Co, the investment vehicle of Germany's 
billionaire Reimann family, is expected to close a $13.9 billion 
acquisition of Keurig this quarter, adding to its growing 
portfolio of companies, from high-end brands like Stumptown to 
European mass market leader Jacob Douwe Egberts.  urn:newsml:reuters.com:*:nL3N13W419 
     In the past year, Keurig's coffee-buying procedures have 
undergone a number of changes. It shifted its coffee buying 
office from Vermont to Switzerland, in a move that could reduce 
its tax bill, help it expand into the European market and gain 
access to Switzerland's expertise in commodity trading. 
 urn:newsml:reuters.com:*:nL1N11E1IT 
    Gordon did not give details on why Keurig might drop Coffee 
Holding as a supplier after the JAB deal closes. 
    Coffee Holding's concerns come after JAB's growth has 
disrupted the global coffee trade, as roasters they acquire tend 
to change net financing terms shortly after being bought, 
forcing suppliers to wait longer before getting paid. 
 urn:newsml:reuters.com:*:nL8N13X30P 
    Gordon said financing terms were "not a risk factor," and a 
company representative added that Coffee Holding has sales to 
Keurig booked out to 2017.  
    Gordon made the comments after a regulatory filing on 
Tuesday in which Coffee Holding said it was unclear what impact 
the deal would have on its relationship with Keurig.  
    Keurig and JAB both declined to comment.  
   Keurig has increased its net financing terms to 60 days, up 
from an industry standard of 30 days, meaning trade houses and 
importers must wait longer to get paid for green beans after 
delivering them to Keurig.  
    Other roasters have boosted their financing terms to 120 
days or more after being bought by JAB, which increases the 
middlemen's risk and can tie up cash.  
    Coffee Holding sold $63.8 million worth of green coffee to 
Keurig in fiscal 2015, or 54 percent of total net sales.  
    Its relationship with Keurig may already be in decline. 
Sales to its "largest green coffee customer" fell 12 percent in 
volume terms, the company said in a Tuesday press release.   
 
 (Editing by Andrew Hay) 
 ((luc.cohen@thomsonreuters.com; +1-646-223-8699; Reuters 
Messaging: luc.cohen.thomsonreuters@reuters.net)) 
 
Keywords: COFFEE HOLDING KEURIG GREEN/