The Reimann family has more than tripled their fortune in ten years

Ten years after it was founded, the holding company took stock on Tuesday. It turned out mixed. “Every dollar invested by JAB Holding in 2011 is now worth $3.40,” CEO Olivier Goudet wrote in a letter to investors. The total return for shareholders averages 13 percent a year. “It’s not spectacular, but it’s solid and satisfying,” explained Goudet.

However, as the Frenchman admits, not only was the target of 15 percent return missed. At 13.3 percent, the global stock index MSCI World performed slightly better than the Reimanns’ managed portfolio over the same period.

JAB’s partners don’t just manage the family’s assets. In total, they manage more than $55 billion. The capital comes from various co-investors who invest in the JAB holdings in parallel. The JAB Consumer Partners fund, which was launched in 2014, has currently invested more than 20 billion dollars from family offices and institutional investors. More than twelve billion have been distributed again since 2019.

This fund is crucial for JAB, not only states the rating agency S&P. “He gives us much more clout,” said JAB Vice-Chairman Joachim Creus a year ago to the Handelsblatt. “This enables us to make important acquisitions and build up large companies – without the Reimann family having to get into over-indebtedness.”

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In the past ten years, JAB chief strategist Harf has completely restructured the portfolio. The focus is now on consumer goods and services. Harf’s strategy is: buy companies in an industry, build them up, merge them and take them public. “It is important to JAB to be in control of all of its investments. In this way we can determine everything – from the strategy to the dividend policy,” Harf once told the Handelsblatt.

JAB started in 2011 with $9 billion in equity and $1 billion in net debt. A large part of the money was in the consumer goods manufacturer Reckitt Benckiser, the former parent company of the industrial family. In addition, there was the cosmetics group Coty and luxury brands such as Bally and Jimmy Choo.

Reimanns and JAB have now completely separated from Reckitt Benckiser and thus from their historical roots in Pforzheim and Ludwigshafen. “The performance and return on shares were disappointing,” Goudet explains the move.

Focus on coffee and drinks

Today, half of the JAB investment portfolio is focused on coffee and beverages with holdings in publicly traded companies Keurig Dr. Pepper and JDE Peet’s (Jacob’s Coffee). There are also quick service restaurants such as Panera Bread and Pret-A-Manger with 15 percent and the donut chain Krispy Kreme, which went public in the summer, with a three percent share of the value of the portfolio.

The beauty group Coty accounts for 15 percent. The new promising animal health division, which has only been built up through acquisitions since 2019, is now larger with a 16 percent share. “Animal health has been one of our best investments ever in recent years. A dog is as much a part of the family today as a child,” said Creus. JAB will continue to invest heavily in veterinary clinics.

JAB boss Goudet emphasizes how important the restructuring of the portfolio was. With an average return of 17.2 percent, JAB’s new holdings developed significantly better than the original investments at 6.9 percent.

Nevertheless, there are holdings that cause concern. Although JDE Peet’s is the world’s largest pure-play coffee company, with sales of 140 billion cups a year it accounts for eleven percent of the world market. In the middle of the 2020 pandemic, the IPO succeeded in Amsterdam. Nevertheless, the share price is under a lot of pressure and is now ten euros below the issue price of around 36 euros. Goudet considers this assessment to be unjustified.

Coty, on the other hand, has long suffered from management errors, a lack of beauty expertise and high debts. The beauty brands bought by P&G were poorly integrated. “We have learned from our mistakes,” emphasizes Goudet. The new Coty boss Sue Nabi is paving the way for the turnaround.

The sandwich chain Pret-A-Manger was the only JAB investment that needed financial injections as a result of the corona crisis. JAB wants to stick with the brand in the long term. An IPO that was envisaged before the pandemic was out of the question, at least in the next three to four years.

IPO of cafe chains imminent

Instead, the US company Panera Brands is preparing for an IPO. The group was recently formed from chains Panera Bread, Caribou Coffee and Einstein Bagel Brothers. JAB did not give any details about numbers and the possible IPO. Panera Brands has a total of 4,000 stores with 110,000 employees.

In order to be able to make acquisitions at any time, JAB liquidity is important. It rose to a record $7.2 billion at the end of the year. However, the mountain of debt is similarly high, which comes from, among other things, entering into US animal hospitals such as Compassion First and NVA.

Net debt was reduced slightly by 1.5 billion dollars from 7.7 billion within one year – mainly as a result of favorable exchange rates. JAB recently gave itself more room to breathe financially through debt restructuring. The most recent ratings from JAB were BBB+ with a stable outlook from S&P and Baa2 with a stable outlook from Moody’s.

The JAB companies are also feeling the effects of the Ukraine war. “Inflation, fueled by rising energy, raw material and labor costs, will continue and reach levels not seen since the 1970s,” predicts JAB boss Goudet.

The portfolio is now crisis-proof. In any case, in the first two months of the current year, JAB developed stably with an increase of 2.3 percent, while the MSCI World Index fell by 7.6 percent.

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