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
