Dive Brief:
- Keurig Dr Pepper is projecting roughly $200 million in supply chain savings for its coffee business over the three years following its acquisition of JDE Peet’s, according to an investors presentation.
- As part of the acquisition, Keurig Dr Pepper will spin off its coffee unit into a separate entity, which executives expect will benefit from improved sourcing resiliency and network optimization. The company expects the acquisition to close in early 2026, with the business separation to be ready operationally later that year, per an earnings call last week.
- “Obviously, as a larger company with greater supply chain capabilities, we will be much better positioned to navigate external volatility like tariffs and commodity fluctuations,” CEO and Director Tim Cofer said during the call.
Keurig Dr Pepper aims for coffee spinoff savings
Dive Insight:
Keurig Dr Pepper is aiming to fortify its coffee business during a particularly difficult time for coffee makers. In addition to increased tariffs on imports from major coffee-producing countries like Brazil and Vietnam, prices for beans have been on the rise in recent years due to dwindling harvests in the face of climate change.
The combined coffee business will have more robust green coffee sourcing capabilities as well as direct and indirect spend pools, Cofer said. The company will also target blend optimization, per the presentation.
Beyond procurement benefits, the company is also targeting manufacturing and logistics upgrades through the acquisition and spinoff. The company is specifically planning to consolidate its manufacturing footprint while optimizing its logistics network, per the presentation. JDE Peet’s announced last week it will be shuttering two facilities in Brazil and the U.S.
The projected supply chain savings Keurig Dr Pepper is targeting make up about half of a total $400 million in cost reductions expected for the separated coffee business overall. The other half will come from savings across SG&A and IT cost cuts.
“This target has been validated through both top-down and detailed bottoms-up planning, and we see it as highly actionable,” Chief Transformation and Supply Chain Officer Roger Johnson said, noting that the company has already established teams to focus on post-acquisition priorities.
Johnson, who has been chief supply chain officer for the beverage giant since 2022, added the chief transformation officer title in September. As part of his expanded duties, he is leading a newly established transformation management office, which houses commercial and supply chain functions, and overseeing the separation of Keurig Dr Pepper’s coffee and beverage businesses.
