KDP to Spin Off Coffee Unit After $18.4 Billion JDE Peet’s Acquisition

In 2018, Bob Gamgort, then CEO of Keurig Green Mountain, redefined the beverage landscape by merging with Dr Pepper Snapple for nearly $19 billion, creating the new Keurig Dr Pepper (KDP) [1]. The combined entity leveraged artificial intelligence to anticipate surges in demand for K-Pods during the early stages of the pandemic, enabling it to outpace rivals in inventory management and capture significant market share in both coffee and soft drinks. During that period, KDP’s soft drink sales surged, capitalizing on consumer stockpiling behavior [1].

However, the long-term viability of the merged business has been called into question. While soft drink revenues continue to perform well, the coffee segment has struggled. In Q2, soft drink sales increased by 10.7% year-over-year, while U.S. coffee sales declined by 1.9% and international coffee sales by 3.8% [1]. These figures have led to a broader reassessment of the strategic fit between the two businesses.

On August 25, KDP announced a plan to separate its coffee and soft drink operations [1]. The company will first acquire JDE Peet’s, a European coffee giant with brands such as Jacobs and L’Or, for $18.4 billion [1]. Following the acquisition, KDP will combine its Keurig arm with JDE Peet’s to create a new global coffee entity with annual revenues near $16 billion [1]. This new entity will then be spun off into a separate company, while the remaining KDP will focus exclusively on its soft drink portfolio, which includes 150+ brands such as 7 Up, A&W root beer, and Snapple [1].

Tim Cofer, KDP’s CEO since 2023, has been instrumental in shaping this strategic shift. A seasoned executive with a background in Kraft Foods and Mondelez, Cofer has a proven track record in large-scale integrations and acquisitions. Notably, he managed the successful post-merger integration of Kraft Foods and Cadbury, and later expanded Mondelez’s presence in Asia by acquiring a major Vietnamese snack brand [1]. Cofer argues that the global coffee market is a $400 billion industry, and he remains bullish on its long-term potential [1]. He points to a recent rebound in U.S. retail coffee sales as a positive indicator.

The JDE Peet’s acquisition is a bold move, though it initially caused a 11% drop in KDP’s stock price [1]. Analyst Connor Rattigan of Consumer Edge notes that the decision reflects an acknowledgment that coffee and soft drinks operate under fundamentally different business models [1]. For example, KDP’s direct-store-delivery system gives it a strong edge in the soft drink market, especially in small retailers and convenience stores. However, this advantage is less applicable to K-Pod sales, which are primarily shipped to large retailers [1].

Rattigan emphasizes that KDP’s focus on soft drinks could unlock significant growth, particularly in underpenetrated markets such as restaurants, where Coca-Cola and Pepsi maintain strong positions [1]. With recent successes like Dr Pepper surpassing Pepsi in sales, KDP appears well-positioned to expand its footprint in food service and other distribution channels [1].

KDP’s aggressive entry into premium categories like energy drinks—most recently with the acquisition of Ghost, a Las Vegas-based energy drink brand—highlights its strategy to increase per-unit profitability [1]. Cofer’s experience in marketing and dealmaking is seen as crucial to navigating this complex landscape and proving that the separation will pay off for investors.

Source:

[1] title: Coffee and soda don’t mix, decides KDP’s CEO—but for investors, adding Peet’s and splitting the giant in two could pay off

(url: https://fortune.com/2025/08/26/keurig-peets-dr-pepper-coffee-stock-outlook/)