By Robert van den Oever
AMSTERDAM--A company with a long Dutch history is coming home
after decades of U.S. ownership.
On Tuesday, coffee-and-tea maker DE Master Blenders 1753 will be
listed in Amsterdam after being spun off from Sara Lee Corp. (SLE).
The U.S. company bought Dutch company Douwe Egberts through a
series of investments that began in 1978, and is now spinning off
its European coffee-and-tea business under the name DE Master
Blenders 1753. But some observers believe the shares could be set
for a bumpy ride.
The shares will be listed after Sara Lee is split into two
companies. Each current Sara Lee shareholder will receive a share
in DE, so any investors interested in buying the newly listed
shares will have to do so on the market once the current
shareholders sell. But under European law, U.S. index-tracking
funds--which account for 17% of Sara Lee shareholders--are mandated
to sell their shares immediately, which could result in big swings
in the company's share price in the wake of the listing.
Trading in DE shares will begin Tuesday and transactions will be
settled after July 6.
DE will be headed by Michiel Herkemij, who has joined as chief
executive from Heineken NV (HEIA.AE), where he was in charge of one
of the brewer's Mexican units. Jan Bennink, former CEO of Dutch
baby-food company Numico, which was sold to French competitor
Danone SA (BN.FR) in 2007, will become non-executive chairman.
The new management will be tasked with stepping up innovation
and regaining ground from rivals such as Nestle SA (NESN.VX). Many
observers believe Sara Lee's coffee business has under-achieved in
recent years as the U.S. company has focused its attention on other
business areas. Nestle, on the other hand, has moved into new
markets and boosted margins through the success of new products
such as Nespresso and Dolce Gusto.
DE aims to boost its profit margin over the medium term to
between 15% and 17%, from 14% in fiscal 2011. It is also targeting
annual sales growth of 5% to 7%, having generated EUR2.6 billion in
fiscal 2011.
A particular area of focus for DE will be the highly profitable
single-serve product category, which accounts for 11% of the global
coffee market. Nestle dominates the single-serve market with 50%,
while DE has 9% through its L'Or Espresso product, which is
compatible with Nestle's Nespresso machines.
The company's strength has always been in roast and ground
coffee, which accounts for half of the worldwide coffee market.
However, growth in this category is much slower than in the
single-serve market, which has grown 25% a year in the past five
years. In comparison, growth in roast and ground coffee has been
just 5% a year.
In an effort to bridge the gap with its rivals, DE will boost
capital expenditure to between 4% and 5% of sales, from 3%
currently. The next product launch for the company will be the
latest version of the Senseo coffee machine in September or
October. Sara Lee launched the machine in partnership with Royal
Philips Electronics NV (PHIA.AE) in 2001 and it quickly became
popular in the Netherlands, with 33 million machines having been
sold since. But this popularity has been on the wane in recent
years, as consumers have favored the fancier, Italian-style
machines on the market such as Nespresso. DE aims to address this
with the new Senseo machine, which will be able to grind fresh
beans as well as using coffee pads.
Write to Robert van den Oever at
robert.vandenoever@dowjones.com