DOWNERS GROVE, IL -- Sara Lee Corp. is selling its North American foodservice coffee and tea operations to J.M. Smucker Co. for $350 million in cash. The deal, which is expected to close in early 2012, nearly doubles the size of Smucker's foodservice business.
Sara Lee also said that it plans to discontinue its Senseo single-cup coffee business in North America, beginning March 31, with the exception of certain online channels.
The Smucker's acquisition includes Sara Lee's liquid coffee concentrate business sold and licensed under the Douwe Egberts brand, along with a variety of roast and ground coffee, cappuccino, tea and cocoa products sold through foodservice channels in North America.
Sara Lee, whose brands include Ball Park, Hillshire Farm, Jimmy Dean and Sara Lee, has been divesting its noncore businesses for the past decade to focus on its most profitable food and beverage brands. It is planning to split into two public companies in the first half of next year. The North American food business will include such brands as Jimmy Dean and Hillshire Farm. The international beverage business will include brands like Pickwick and Maison du Café.
"In recent years, our North American coffee business has been foodservice-based and largely unbranded, which is a challenge in a highly competitive marketplace," said Jan Bennink, executive chairman of the board of Sara Lee Corp., explaining the company's rationale for divesting the business to J.M. Smucker.
Meanwhile, J.M. Smucker, based in Orrville, OH, has been growing its coffee business. It owns the Folgers and Dunkin' Donuts brands and acquired Rowland Coffee Roasters' Hispanic coffee brands Café Bustelo and Café Pilon earlier this year.
"This transaction further strengthens our position as a leading North American coffee company," said J.M. Smucker chief executive Richard Smucker. "The addition of liquid coffee concentrate to the Smucker portfolio aligns with our desire to compete in all forms of coffee, adding to our roast and ground, single serve, instant and ready-to-drink platforms."
In addition to the sale, the two food-makers have entered into a long-term partnership to develop and improve liquid coffee technologies. As part of that deal, Sara Lee will receive $50 million over 10 years, plus growth-related royalties, which will help cover its research and development and other expenses.
The company said it plans to sell or close the remaining assets of its North American coffee business. Of the $530 million in sales generated by Sara Lee's foodservice beverage business, about $285 million is associated with assets sold to J.M. Smucker.
The companies anticipate that 450 of the 690 people currently employed at Sara Lee's North American foodservice beverage business will transfer to J.M. Smucker.