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Sara Lee sells coffee, tea business to J.M. Smucker Co.

October 25, 2011
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Downers Grove, Ill.-based Sara Lee Corp. announced the sale of a majority of its North American foodservice coffee and tea operations to The J.M. Smucker Co., Orrville, Ohio, for $350 million. The transaction is expected to close near the beginning of 2012.

"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 for Sara Lee Corp., in a statement. "Our decision to sell a major part of this business to Smucker is an example of Sara Lee Coffee and Tea's renewed focus on sustainable, profitable growth and part of our mandate to create the strongest possible pure-play company.

"Smucker, which owns leading U.S. coffee brand Folgers, and Sara Lee have also entered into a licensing agreement to cooperatively develop liquid coffee technologies to drive long-term growth,” she continues. “We look forward to working with Smucker and to the promising future of our new pure-play coffee and tea company."

As a result of the licensing and support agreement, Sara Lee will receive a 10-year income stream totaling approximately $50 million, plus growth-related royalties, which will help cover its research and development and other support expenses.

"This transaction further strengthens our position as a leading North American coffee company," said Richard Smucker, chief executive officer of The J.M. Smucker Co., in a statement. "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. The innovation partnership further allows us to collaborate on new technologies in the liquid coffee category for the foodservice market."

The North American foodservice beverage business currently employs approximately 690 people. In fiscal 2011, the foodservice beverage business generated net sales of approximately $530 million, of which approximately $285 million was associated with the assets sold to The J.M. Smucker Co. Following the execution of the agreement,
approximately 450 people will transfer to The J.M. Smucker Co.

The company also announced that Senseo coffee in North America will be discontinued as of March 31, 2012, with the exception of select online channels. Sara Lee plans to sell or close the remaining assets of the North American coffee business, and expects to provide an update on the process before the end of calendar year 2011.

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