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Diving overview:
- Keurig Dr Pepper expects to reduce supply chain costs for its coffee business by about $200 million over three years after acquiring JDE Peet’s, according to an investor presentation.
- As part of the acquisition, Keurig Dr Pepper will spin off its coffee business into a separate entity, and management expects to benefit from improved sourcing resilience and network optimization. The company expects the acquisition to close in early 2026 and the business separation to be operationally ready later that year, according to 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 such as tariffs and raw material changes,” CEO and director Tim Cofer said during the call.
Keurig Dr Pepper aims to cut costs with coffee spinoff
That’s the $400 million in cost savings Keurig Dr Pepper expects from its coffee spinoff in certain business functions.
Dive Insights:
Keurig Dr Pepper aims to strengthen its coffee business, especially during difficult times for coffee makers. In addition to the increase in import tariffs in major coffee producing countries such as Brazil and Vietnam, and the recent decline in harvests due to climate change, coffee bean prices are on the rise.
The combined coffee business Sourcing more powerful green coffee beans ability As well as direct and indirect spend pools, Cofer will target mix optimization as per the presentation.
In addition to procurement benefits, the company is targeting manufacturing and logistics upgrades through acquisitions and spin-offs. The company specifically plans to consolidate its manufacturing footprint while optimizing its logistics network, according to the presentation. JDE Peet’s announced last week that it would close two facilities in Brazil and the United States.
Keurig Dr Pepper’s expected supply chain savings are expected to account for about half of the total $400 million in cost savings expected across its separate coffee businesses. The other half comes from SG&A and IT cost savings.
“This goal has been validated through top-down and detailed bottom-up planning, and we believe it is highly feasible,” said Roger Johnson, chief innovation and supply chain officer, noting that the company has already assembled a team to focus on post-acquisition priorities.
Johnson, who has served as the beverage giant’s chief supply chain officer since 2022, added the title of chief innovation officer last September. As part of his expanded role, he is leading the newly created Innovation Management Office responsible for commercial and supply chain functions and overseeing the separation of Keurig Dr Pepper’s coffee and beverage businesses.
