Since the beginning of 2015, 50 mergers and acquisitions worth a total $3 billion have occurred worldwide in the coffee and coffee-related sectors, according to Dealogic. However, according to the data, of this total, 97% of the dollar value represented is accounted for by strategic buyers within the industry itself.

 

Acquisitions within the industry are often more costly than private equity is willing to consider. The Wall Street Journal reports that currently, publicly listed snack companies including coffee and tea chains are trading at 31.5 times multiple to their earning according to investment bank, Harris Williams & Co.

 

Over the past years, private equity’s involvement in the coffee industry has been spotty. Last year, there were only three sponsor-backed deals worth a total $160 million – indicating a stark decline from 2013 which recorded deals valued at $8.55 billion. Although it must be taken into account that such a high value was boosted in large part to the $8.10 billion acquisition of an 85% stake in D.E. Master Blenders 1753 BV led by German investment group, Joh. A. Benckiser GmbH and including BDT Capital Partners and Quadrant Capital Advisors.

 

One recent particularly active investment entity in the coffee sector has been JAB, the investment arm of Germany’s Riemann family. In July the group announced a deal for the purchase of the Danish coffee-bar chain, Baresso Coffee A/S, after acquiring Berkeley, California-based Coffee roaster, Pete’s Coffee & Tea Inc. in 2012, and D.E. Master Blenders 1753 BV in 2013. Other recent developments include Mondelez International Inc. combining its coffee business with D.E. Master Blenders in July of this year to form the pure-play coffee joint venture company, Jacobs Douwe Egberts, with €5 billion in annual revenue.

 

But, for private equity firms looking for entry into the sector, there is a forthcoming opportunity, as Piper Jaffray & Co. is currently assisting in bringing Intelligentsia Coffee Inc. to market. Despite still being of a small scale with only 10 outlets, it does have a position among the faction of gourmet brewing companies that are garnering consideration from investors as well as consumers.

 

The sector will indeed be one to watch given that 59% of adults in the U.S. drink coffee every day, outpacing soda as the country’s top beverage by 20 percentage points, according to the 2015 National Coffee Drinking Trends study conducted by the National Coffee Association. And it is this rate of consumption that will bring revenues within the industry to $27.6 billion with a profit margin of 6% this year according to IBISWorld.