BY LUC COHEN*
new york – Coffee Holding Co Inc, a New York-based coffee merchant and roaster, said major customer Keurig Green Mountain’s plans to go private could put the two companies’ decades-long relationship at risk.
Coffee Holding, a relatively small U.S. coffee importer, gets more than half its revenue from selling green, or unroasted, coffee beans to Keurig, the United States’ leading single serve roaster, filings show.
“The risk is if they change their buying procedures and decide we’re not part of the equation,” Coffee Holding President and Chief Executive Andrew Gordon said in an email on Wednesday.
JAB Holding Co, the investment vehicle of Germany’s billionaire Reimann family, is expected to close a $13.9 billion acquisition of Keurig this quarter, adding to its growing portfolio of companies, from high-end brands like Stumptown to European mass market leader Jacob Douwe Egberts.
In the past year, Keurig’s coffee-buying procedures have undergone a number of changes. It shifted its coffee buying office from Vermont to Switzerland, in a move that could reduce its tax bill, help it expand into the European market and gain access to Switzerland’s expertise in commodity trading.
Gordon did not give details on why Keurig might drop Coffee Holding as a supplier after the JAB deal closes.
Coffee Holding’s concerns come after JAB’s growth has disrupted the global coffee trade, as roasters they acquire tend to change net financing terms shortly after being bought, forcing suppliers to wait longer before getting paid.
Gordon said financing terms were “not a risk factor,” and a company representative added that Coffee Holding has sales to Keurig booked out to 2017.
Gordon made the comments after a regulatory filing on Tuesday in which Coffee Holding said it was unclear what impact the deal would have on its relationship with Keurig.
Keurig and JAB both declined to comment.
Keurig has increased its net financing terms to 60 days, up from an industry standard of 30 days, meaning trade houses and importers must wait longer to get paid for green beans after delivering them to Keurig.
Other roasters have boosted their financing terms to 120 days or more after being bought by JAB, which increases the middlemen’s risk and can tie up cash.
Coffee Holding sold $63.8 million worth of green coffee to Keurig in fiscal 2015, or 54 percent of total net sales.
Its relationship with Keurig may already be in decline. Sales to its “largest green coffee customer” fell 12 percent in volume terms, the company said in a Tuesday press release. (Editing by Andrew Hay)
