Philips Company to Buy Saeco (Gaggia)

On July 27th, 2009, Philips, the Dutch electronics company, finalized a deal to buy the Italian espresso machine company Saeco (and by default Gaggia).

Philips has been manufacturing the Senseo drip style pod coffee machines for years. Personally, I am not a big fan of the Senseo product. Philips has wanted to be in the home espresso market for a long time. The profits on home espresso machines are in the double digits every year so who wouldn’t want to be in that business?

Why does this interest Kitchenboy and his readers? Well, I am always interested in mergers that affect good companies who are being bought by larger ones, as in Whirlpool’s purchase of KitchenAid or JA Henckels’ purchase of Staub and Demeyere. It is not that I am opposed to companies being purchased, it is just that mergers rarely leave things unchanged.

I worry about how the product quality of the acquired company will be affected. In my opinion, the trouble that KitchenAid experienced with stand mixer plastic gear housings was a direct result of being part of Whirlpool. The problem has been corrected in all current models, but KitchenAid didn’t have these kinds of problems when they were a stand alone company.

Gaggia quality does not seem to have been affected by Saeco over the years, but that may be due to the fact that Gaggia is basically a separate entity. It may very well be that Philips will have no affect on either Saeco or Gaggia. But let’s say that if, after this purchase of Saeco, the quality of the espresso machines goes down hill, then we can point to this sale as a possible reason.

Of note will be the management arrangements going forward; with the Henckels deal, there was language written into the agreement that ensured several years of continuity of management for both Staub and Demeyere. I haven’t heard whether this will also be true for this Philips deal. If there is a similar clause, then Saeco/Gaggia can continue as they are for quite some time.

This is just a marker, a mental note for the future.

One thing is certain, you will see a greater visibility from Saeco products with Philips Corporation’s deep pockets bringing substantial advertising dollars.

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