July 29, 2014

One of Europe’s Oldest and Most Secretive Families Has Been Using Its Private Holding Company To Buy Up The World’s Coffee Assets

I’ve watched in fascination over the past couple of years as German conglomerate Joh. A Benckiser has been quietly buying up the world’s leading coffee brands, acquiring Caribou Coffee for $340 million, Peet’s Coffee & Tea for $974 million, and my personal obsession, Douwe Egberts for $9.8 billion, among others.  The firm is the personal holding company of one of the richest and most secretive families in Europe, the Reimanns.  They still have a ways to go – Starbucks, J.M. Smucker’s (Folgers), McDonald’s, and Nestlé are giants – but the mass consolidation is curious.

These folks have huge stakes in a lot of the biggest brands in the world, including a major ownership position in publicly traded Reckitt Benckiser, which makes Lysol, French’s Mustard, Woolite, Durex, Dr. Scholl’s, and a host of other brands found in homes across the world. 

Douwe Egberts Acquisition

Their capital allocation record appears impressive – back in the early 1990′s, they paid Pfizer $440 million to buy Coty, which they rebranded and grew into one of the world’s premier fragrance companies, manufacturing scents for a cadre of the world’s top fashion houses and A-List celebrities.  They also own makeup giant Philosophy, which cost them around $1 billion.

The Reimanns are interesting because they have managed to keep most of their money a secret; no small feat when your fortune goes back 160+ years.  They are constantly popping up in the most unexpected places, going largely unnoticed by the public, as yet another member of the family crosses the billion-dollar mark from their shares of the family’s conglomerate.

If you’re a fan of hidden empires, you might want to add these folks to your case study files.  It’s a rare thing for a single fortune to survive this long.  Normally, heirs do something stupid along the way, or it is largely lost to taxes or donated through charitable gifts.  I’m not sure it’s a good thing, to be honest.  The older I get, the more I become convinced that any inheritance beyond the fourth generation is immoral, which would require a far greater explanation and justification than I’m willing to provide at the moment.  I’m finishing Lost World, which I read today after completing its predecessor, Jurassic Park, yesterday.  After that, I have a few things left to cross off my agenda before I call it a night.

  • Yaacov

    Why immoral to bequeath past the fourth generation?

    • Nick Pape

      Perhaps Joshua should write an article about this, but I assume it has to do with several factors. We already he is already opposed to dynastic wealth, as it has the potential to undermine the meritocracy that capitalism depends on.. I’m not sure why he picked 4, but perhaps it has something to do with the fact that 4th generation kids will possibly never know their great-grandparent who made the fortune, and will not be able to absorb the knowledge, wisdom, and desire for appropriate usage of the money that person may (or may not of had).

      Without going into details, we know “the rich” control a really large portion of wealth in the country. Right now this isn’t a bad thing, as 90% are self-made and my guess is that there was probably a large turnover in the “top 1%” since the 80′s as well. So, what we are really trying to prevent here is unethical dynasty families (composed potenntially of kids who did nothing to earn their position, yet probably believe themselves superior to the not ultra-rich) which control most of the wealth (and thereby political power, at least here in ‘Murica).. It undermines the way we want an efficient system to run (having the best, most innovative/hardworking/smart/etc people at the top).

      On the other hand you have to balance the fact that everyone has a right to keep their earned property. Is it right to take people’s hard earned assets because they died? Isn’t it still their property to do with as they wish? If I worked my ass off for 60 years and provided massive amounts of value to society, shouldn’t I be able to provide some of that to my biological offspring? It’s a balancing act that I don’t have the answers to at all. But I’d love to see Joshua’s response.

      • Clever Dude

        Nick,

        I don’t know if you enjoy history, but Will and Ariel Durrant have a great observation. If you have a free society, you will inevitable have inequality. If you instead try to enforce equality you ultimately make society less free.

        • Nick Pape

          I totally agree. I think Joshua’s point is that effective Capitalism operates to some degree as a meritocracy. If, for some reason, the meritocratic features which allow our system to thrive are undermined, we could have issues. Note I don’t see this happening in America at the moment.

    • joe pierson

      IMHO I believe estate tax should be 100% in the USA. There is probably no good logical or moral reason to support this opinion, other then I wish to live in a country without dynasties, which is anti-American, in my opinion. But I have no problem with other countries having 0% estate tax.

      • Frankie

        Count a 3rd vote for an article on the opposition to long-term inheritance.

        • T

          I would be interested in that aswell, and also how Joshua would pass on his wealth to heirs to minimize money lost in taxes (If he were in that situation).

      • J

        100% estate taxes still leaves plenty of loopholes and means to transfer wealth so it matters little for people with knowledge and planning. I do understand the point you are making but having government as the main power to confiscate and distribute money is the greater of two evils in my opinion.

        • http://odai.me/ Odai

          I second this.

        • joe pierson

          Not really, with 100% estate tax everyone would give it away beforehand (either legally, illegally, or through loop holes as you say), so the government wouldn’t be involved in redistribution.

      • Scott McCarthy

        If the US had a 100% estate/gift/wealth transfer tax, and a significant number of other countries had no such wealth transfer taxes, wouldn’t that just result in massive capital flight away from the US (resulting in a dearth of high-net-worth individuals, and ensuing lack of capital for new ventures)?

        • joe pierson

          Yes, it was a completely idealistic comment, and ignores the very strong genetic urge to transfer your wealth to your offspring which few can resist (except folks like Buffet).

      • TheLonelyHumanist

        But it’s okay to take a position here that pays 50x the earnings of the same job in another country because your parents could offer you a citizenship here, right?

  • Clever Dude

    Hi Joshua,

    Interesting posting. One thing I think a lot of the public doesn’t understand is how immensely powerful families like the Beckreisers really are. Their companies control wealth which rivals the annual GDPs of small South American countries and they have titanic impacts on their local political and economic systems. More importantly, as you rightly point out – nobody has heard of them.

  • Cossette

    I find it quite interesting for this family to have such legacy passed on from one generation to the next one and so on. I wonder if they have a formula for their staying power, wisdom, street smartness, or business acumen, perhaps. Kudos to this family. I just hope that they also share some of their riches with the many less unfortunate souls out there through charity works.

    C.S.MANESE888@gmail.com