STATEN ISLAND, N.Y., U.S. — Coffee Holding Co., Inc. (“Coffee Holding” or the “Company”) (Nasdaq: JVA) announces the acquisition of substantially all of the assets of Steep N Brew Coffee Company (“Steep N Brew”) through Generations Coffee Company LLC, the Company’s specialty coffee joint venture in Ohio (“Generations”).
Located in Madison Wisconsin, Steep N Brew is a highly recognizable regional roaster selling to most large retail channels in the upper Midwest area since 1979.
Their brand portfolio includes the Steep N Brew brand, their Fair Trade Organic line, Café Fair and value line, Kendra. Revenues of Steep N Brew for the past fiscal year were approximately $7 million.
The purchase price under the asset purchase agreement was comprised of (i) a cash payment of $1.6 million, (ii) a cash payment of $1.1 million for the payment for the inventory purchased under the asset purchase agreement and (iii) the issuance of a promissory note in the principal amount of $150,000. Generations intends to incorporate the infrastructure of Steep N Brew into the existing business model of Generations.
“This is an exciting transaction for Generations and our company. Through the acquisition of Steep N Brew, we have doubled our existing sales of our specialty division at Generations, acquired additional roasting capacity, increased our shelf presence, improved our distribution channels and efficiencies and added three proven coffee brands to our previously existing diverse portfolio of brands.
We now have two highly efficient Specialty Coffee factories in the Midwest where we can produce all varieties, packs and sizes of specialty coffee retail and foodservice products. This acquisition increases our presence in the upper Midwest and Great Lakes regions for foodservice opportunities which traditionally have been the smaller part of our business.
We believe this represents a good opportunity for sales growth and margin expansion, while achieving new efficiencies in terms of freight logistics, order size and increased distribution channels as many of Steep N Brew’s customer base will now become customers by default for many of Generations and Coffee Holding Company’s legacy brands.
We also believe the same holds true for Steep N Brew brands at existing Generations customers. In addition, we believe that Coffee Holding/Generations will bring a number of cost saving efficiencies to this transaction, which we expect will have a positive impact on profitability of the acquired business.
Steep N Brew currently operates profitably and we expect our upper level procedural changes to improve operating margins and sales volumes.
This transaction is exactly the type we believe fits into our overall growth strategy of acquiring well run regional companies with a strong retail presence at a purchase price that should allow us to achieve a positive return on our investment,” stated Andrew Gordon, President and CEO of Coffee Holding.
