Sam Kaplan/Bloomberg Markets

The Caffeine Fix

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Models and actors descended on New York’s Cipriani Wall Street restaurant last May, Georgia May Jagger, Chris Tucker and Victoria’s Secret Angel Doutzen Kroes among them.

The real VIP in the ballroom was someone few people would recognize. He’s Peter Harf, first among equals in a trio of executives who manage the $14 billion fortune of Austria’s Reimann family, Bloomberg Markets magazine will report in its March issue. The closely held investment firm Harf runs as senior partner, Luxembourg-based JAB Holding Co., widely known as JAB, is plotting a massive challenge to Switzerland’s Nestle SA in the global coffee industry.

The occasion this evening in Manhattan was the annual gala for Delete Blood Cancer DKMS, the foundation Harf co-founded after the death of his first wife in 1991. The guests represented Harf’s many worlds. Byron Trott, chairman of investment and advisory firm BDT Capital Partners, had enlisted his billionaire clients to invest in JAB’s coffee deals. Executives from JAB-controlled Coty Inc., seller of namesake fragrances for David Beckham and Jennifer Lopez, were making the rounds. Others sported Jimmy Choo pumps, a JAB brand made famous in Sex and the City.

These days, Harf, 68, has his mind on a business far less glamorous than rock star perfumes and $2,995 crystal-encrusted stiletto heels. On May 7, the day of the gala, he and JAB partners Bart Becht and Olivier Goudet announced a $5 billion cash deal for the coffee unit of Mondelez International Inc. It was one of the rapid-fire purchases in JAB’s $17 billion caffeine-infused race to create the world’s second-biggest coffee conglomerate, behind Nestle and its 22 percent market share.

Dutch Coffee

JAB began its coffee run in June 2012. It bought a 12 percent stake in Amsterdam-based D.E Master Blenders 1753 NV, the maker of Senseo and Douwe Egberts brands. It increased that to 15 percent in October 2012 and bought the whole company in October 2013. At $10.4 billion, the deal was the biggest ever in the $84.5 billion market for ground and instant coffee and coffee beans.

This year, JAB plans to combine the Mondelez business, the second-largest coffee maker, with an 11 percent market share, and No. 3 Master Blenders, at 5 percent, into a new company called Jacobs Douwe Egberts. JAB will also run three coffee shop and bagel chains, including Peet’s Coffee & Tea Inc. and Caribou Coffee Inc., in the U.S.

If anyone can figure out how to profit from the world’s growing thirst for coffee, JAB can, says Ali Dibadj, who covers consumer products at Sanford C. Bernstein & Co. in New York.

Beer Billionaires

Becht, who serves as JAB’s chairman, says the firm’s executives, junior partners and handpicked chief executive officers for the companies it controls have their own money riding on success.

“We’ve all invested pretty much close to our total personal wealth in JAB,” he says during a November interview.

Trott’s BDT Capital brought in co-investors, including Colombian billionaire Alejandro Santo Domingo. Harf tapped two of the founding families of Anheuser-Busch InBev NV, the world’s largest brewer.

JAB managed about $28 billion in assets in 2014, double the $14 billion in 2011, Becht says. JAB’s equity value rose to $15.2 billion at the end of 2014 from $9 billion at the end of 2011.

“The JAB guys are the best team in consumer goods. Period,” Dibadj says. “These folks are the smartest operators of companies that I’ve ever seen.”

European Trio

While the JAB trio may be savvy dealmakers and managers, they’re little known outside of Europe. Harf, who was born in Germany, led JAB for almost a quarter century before bringing in two partners. Dutchman Becht, 58, ran decongestant and condom maker Reckitt Benckiser Group Plc in Slough, England, before joining in 2011. Goudet, 50, a Frenchman, was chief financial officer of candymaker Mars Inc.

The four billionaire Reimann siblings who entrust JAB with their fortunes are even less visible. Four years after the death of Albert Reimann, the great-great-grandson of the original co-owner of chemical maker Joh. A. Benckiser GmbH, his nine adopted heirs appointed Harf as CEO to manage their assets. Albert Reimann had left each with 11.1 percent stakes in the family chemical company.

In 1996, five Reimanns bought out their four siblings. Andrea Reimann-Ciardelli went on to sell her share for almost $1 billion in 2003 to the other siblings who’d kept their stakes. These Reimanns, all trained scientists, have never been involved in any JAB businesses and have never granted interviews. The family declined to comment for this story.

Billionaire Family

Under Harf’s tutelage, the Reimanns have moved into the ranks of the world’s 500 richest people. Renate Reimann-Haas, 63; Wolfgang Reimann, 62; Stefan Reimann-Andersen, 51; and Matthias Reimann-Andersen, 49, have individual net worths of $3.5 billion, according to the Bloomberg Billionaires Index.

They control 92.5 percent of JAB’s equity, with JAB executives owning the rest.

“Peter is a great patriarch and consigliere to the family,” says Trott, who met Harf through Goudet. “He’s been with the Reimanns from the very beginning. Their trust and confidence in JAB stems from that relationship.”

Coffee Giants

With its shift into coffee, JAB is backing a consumer favorite with unique staying power. Grocery items from soda to soup have seen sales dented by price wars and health concerns. The coffee market has grown by 44 percent since 2009 and is expanding at about 5 percent a year, according to Euromonitor International. Single-serve capsules, delivered by machines such as Nestle’s Nespresso, are rising at quadruple that rate.

Where JAB’s plans may falter is in its lack of innovation with roast and ground coffees. JAB’s Peet’s and Caribou shops will be butting up against outlets run by giants Starbucks Corp. and Dunkin’ Brands Group Inc.

“They’re No. 2, but a distant No. 2 at the moment,” says Jonny Forsyth, a beverage industry analyst at Mintel Group Ltd.

JAB also faces a looming deadline that could derail its ambitions. It’s awaiting a decision by European Union regulators, due by May 6, on whether combining Mondelez’s coffee business with Master Blenders will hurt competition. To appease regulators, JAB has put the L’Or Espresso and Cafe Grand’Mere brands on the block.

What JAB lacks in coffee experience, it might make up for with its speed and willingness to spend. Dave Burwick, who at the time was North American head of Weight Watchers International Inc., says he was ready to accept an offer to become CEO of publicly traded Peet’s Coffee in the summer of 2012. Then its board suddenly went silent.

Job Interview

The next thing he knew, JAB had swooped in to buy Peet’s. Burwick found himself once again interviewing for the CEO job, this time over breakfast at the Sofitel New York hotel with Harf, Becht and Goudet. They offered him the post the next day.

“I went from probably being CEO of a public company to being CEO of a private company, working for guys I had not even met 24 hours before,” Burwick recalls.

Becht says he’s always had a passion for coffee.

“I’ve been investing in coffee for a long time, ever since Green Mountain Coffee became public in 1993,” says Becht, who has since sold his shares in the company now called Keurig Green Mountain Inc.

Harf met Goudet, who’s now JAB’s CEO, on the board of another beverage company, beermaker Anheuser-Busch InBev. Goudet, a silver-haired expatriate who lives outside Washington, was also bullish on the drink.

“He developed our coffee strategy,” Harf says in an e-mail. “We like the growth, the low capital intensity, the stability over the business cycle and the pricing power of strong brands.”

Citric Acid

Harf arrived at Joh. A. Benckiser GmbH in 1981, fresh from Boston Consulting Group. The namesake company was founded by Johann Adam Benckiser in 1823 in Pforzheim, Germany, and attracted chemist Ludwig Reimann five years later. The company passed to the Reimann family when one of Johann Benckiser’s heirs ceded his stake.

It went on to spend a century and a half making citric acid and other specialty chemicals before wading into such products as denture adhesive cream. Harf embarked on an international buying binge, adding European detergent makers, and began selling the chemical assets. The consumer business accelerated with Becht, who joined Benckiser from Procter & Gamble Co. in 1988.

Four years later, Harf acquired perfume maker Coty from Pfizer Inc. for about $440 million.

“We bought consumer-goods businesses from companies for which it wasn’t the primary interest,” Becht recalls. “You could make a lot of changes and have a big impact.”

Consuming Growth

Becht and Harf worked in tandem. Becht rose to CEO of household-products maker Benckiser NV in 1995, while Harf engineered a merger with British consumer-goods outfit Reckitt & Colman Ltd. to create Reckitt Benckiser in 1999. Becht posted annual net income growth of more than 10 percent during most of the next decade.

Market value increased more than sixfold, earning Becht $137 million from share options in 2009.

“Peter trained Bart,” Trott says. “He was his protege, very well skilled and schooled.”

Seeking a favorable tax environment for the Reimanns, Harf moved their family offices, Lucresca SE and Agnaten SE, to Vienna from Ludwigshafen, Germany, in 2006. The family traded their German passports for Austrian ones.

Luxury Lessons

Harf created high-end retailer Labelux Group GmbH in 2007, adding fashion brands Bally, Belstaff and Zagliani. Labelux purchased Jimmy Choo from private-equity firm TowerBrook Capital Partners LP in May 2011.

Luxury products haven’t lived up to JAB’s expectations. Coty pulled a $10.7 billion bid for cosmetics seller Avon Products Inc. in May 2012. Then it delayed its own IPO. When CEO Michele Scannavini left, Becht came in to run the business for now.

In October, JAB took Jimmy Choo Plc public in London. The shoemaker’s 653 million pound ($997 million) market value on Feb. 10 was only about 100 million pounds more than JAB had paid in 2011.

JAB folded Labelux last year and put the brands under its direct control.

“We don’t claim that we’re experts in luxury,” says Becht, a fan of Coty’s Bottega Veneta fragrance, who’s wearing a black Armani Collezioni suit and a white shirt without a tie in Coty’s New York office. “Having said that, the businesses are gradually doing better and better.”

Bagel Deal

Coffee is showing more promise, especially when it’s combined with bagels. On Sept. 4, Goudet approached billionaire investor David Einhorn about bagel chain Einstein Noah Restaurant Group Inc., according to a person familiar with the talks. Einhorn’s hedge fund, Greenlight Capital, was Einstein’s largest stockholder, with more than a 35 percent stake.

The two met at Cafe Centro in New York’s MetLife building. Harf and Becht didn’t take part in the discussions. Goudet was easy to deal with, the person familiar with the matter says. The acquisition, valued at $374 million, was announced on Sept. 29 and closed five weeks later.

“We do the standard market scouting of what’s out there, try to build relationships over time with targets and see if we can make transactions happen,” Becht says. “The guns-blazing approach generally doesn’t work. We’ve never done hostile transactions and aren’t planning for one.”

All the same, JAB isn’t ruling out potential coffee deals, including Keurig Green Mountain.

“Time will tell if Green Mountain will ever be part of the portfolio,” Becht says in November. “Nothing is excluded, ever.”

Harf is betting on an experienced team, well-known investors and the trust of a billionaire family.

“We know that it takes time to build successful companies,” he says. “Our investment horizon is defined in generations, not years.’

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