JDE Peet’s N.V.

Annual Report

2020

Table of Contents

key 2020 highlights

brand highlights

Consolidated Financial Statements

Our value creation model

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Disclaimer PDF print – this document is only a ‘printed version’ and is not the original annual financial reporting including the audited financial statements pursuant to article 361 of Book 2 of the Dutch Civil Code. This original annual financial reporting, including the audited financial statements and the auditor’s report thereto are included in the single report package which can be found on the JDE Peet’s website. In any case of discrepancies between this ‘printed version’ and the report package, the single report package prevails.

eur 877mln

Free cash flow

1st company to use the SourceUp model to inform coffee sourcing decisions

87%

packaging2 designed to be reusable, recyclable or compostable

EUR 6.7bn

Total sales

EUR 1.3bn

Total Adjusted EBIT 1

EUR 933mln

Operating Profit

6.2%

Organic adjusted EBIT growth

-10.5%

Operating Profit growth

-0.2%

Organic Sales growth

43 markets

Where we are the
#1 or #2 player

78%

of sales generated in these countries

4,500 cups

of coffee & tea served

every second

29%

Coffee purchases with 3rd-party sustainability certification or verification

30 million cups

of coffee & tea donated in

30+ countries

19 countries

worldwide

380,000

smallholders reached directly since 2015

40 projects

active projects with smallholders

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Annual Report 2020  —  JDE Peet’s N.V.   

JDE Peet's at a glance

We are pleased to present JDE Peet’s’ first ever annual report. This report is a result of – and a testament to – the determination shown by our employees and partners throughout the year to progress our purpose to Unleash the Possibilities of Coffee and Tea to Create a Better Future.

2020 Performance

JDE Peet’s delivered strong performance in 2020, delivering total sales of EUR 6.7 billion, an operating profit of EUR 933 million and a free cash flow of EUR 877 million. Our global pure play focus, powerful brands, and unique premiumisation strategy all supported record In-Home organic growth in 2020 and underpinned a strong surge in e-commerce.

The strength we experienced in our In-Home segment largely offset the reduction we saw in Away-from-Home consumption, which was severely impacted by various government lockdowns and restrictions that occurred throughout the year. Early on, we adapted our Away-from-Home business models, and as a result, we expect these activities to come out even stronger following the crisis.

2020 was also an important year for our sustainability journey and we made significant progress in each of our three Corporate Responsibility pillars: Common Grounds, addressing the priority issues in our supply chain; Minimised Footprint, aimed at reducing our environmental impact; and Connected People, engaging our employees and our communities.

During the pandemic, the coffee and tea category demonstrated its resilience and, looking back at our achievements in 2020, we can conclude that our focus, discipline and agility have played a crucial role in managing our company during this unprecedented time. Government lockdowns and restrictions resulted in a significant reduction in Away-from-Home consumption as entire sectors such as offices, universities, hotels and restaurants were closed. At the same time, a significant part of the Away-from-Home consumption shifted to In-Home. We adapted swiftly to changing consumer preferences and habits, which resulted, among other things, in continued market share gains in the faster-growing categories like Beans, Pads and Capsules, and helped to position us for success and future growth as we believe these trends will endure.

Under Common Grounds, we increased the share of responsibly sourced coffee and, despite the pandemic, significantly increased the number of smallholder farmers we reach through our collaborative programme. Under Minimised Footprint, we increased our recycling quota and now 87% of our primary and secondary packaging is either reusable, recyclable or compostable, while 33% of our packaging now comes from recycled materials. Recently, we joined forces with Nestlé to establish Podback in the UK, an initiative to ensure that every coffee pod enjoyed is recycled. 

It goes without saying that 2020 was an eventful year for JDE Peet’s and an unprecedented and tumultuous year for the world. We are very proud of the tremendous efforts of our 19,000+ employees who navigated through this changing environment. Amidst the everyday challenges and difficulties experienced by consumers around the world, our teams, in close partnership with our farmers, suppliers and partners, rallied together to ensure the health and safety of our employees, maintain business continuity, serve our consumers and customers, and support local communities.

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Annual Report 2020  —  JDE Peet’s N.V.   

JDE Peet's at a glance

Investing in Innovation

Throughout the year, we continued to invest in our manufacturing network in order to position ourselves for future growth as we look to adapt to changing consumer trends. For example, we expanded our freeze-dried instant coffee capacity at our St. Petersburg, Russia plant, establishing it as one of the largest freeze-dried coffee factories in the world. And because of the strong growth we witness in the aluminium capsules category, which resulted in the production of our ten billionth aluminium capsule this year, we have also announced a new investment of EUR 110 million to expand our manufacturing capacity of aluminium capsules to ensure that we will continue to be able to meet future consumer demand.

Given the importance of sustainable products amongst our customers, we successfully relaunched our leading Senseo brand, with an industry-first compostable coffee pad. This product now contains 100% certified coffee and is complemented by low-environmental impact appliances to create a truly sustainable offering.

These collective efforts demonstrate the company’s commitment to investing in future quality growth, while cementing our position as the world’s largest coffee and tea pure player. 

Unleashing the Possibilities of Coffee & Tea to Create a Better Future

ecosystem to Unleash the Possibilities of Coffee & Tea to Create a Better Future.

We would like to thank all our stakeholders for helping us make 2020 a memorable and successful year for JDE Peet's.

Sincerely,

In 2020, we launched a new diversity and inclusion initiative under Connected People that targets gender balance across JDE Peet’s’ management positions by 2025. By creating an environment where the unique voices of every country, culture and individual are heard, we can better grow our business and spark innovation.

And, last but not least, we also made excellent progress on one of our other key priorities which is to reduce our level of debt. Supported by our strong cash flow profile, we reduced our net debt by EUR 1.4 billion, which reduced our leverage from 4.2 times EBITDA at the start of 2020 to 3.2 times EBITDA by the end of 2020.

This year’s performance has made it clear once again that the combination of our portfolio of brands, technologies and channel strategy is powerful. This allows us to scale and reach consumers with coffee and tea offerings across various price points to meet their diversity of needs, occasions and budgets. This was our strength before the pandemic, during the pandemic, and will continue to be a great advantage in a post-COVID world.

Yes, 2020 was a challenging year. Throughout it all, JDE Peet’s made significant progress across many areas in our first year as a publicly traded company. In this context, our employees’ resilience and dedication kept our factories running, our supply chains effective and our customers and consumers served, despite the pandemic’s many challenges. We also recognise that these accomplishments were not achieved alone, as we worked together with our suppliers, our customers, our partners and our entire

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Annual Report 2020  —  JDE Peet’s N.V.   

JDE Peet's at a glance

Q1

Q2

Q3

Q4

2020 YEAR IN REVIEW

JDE and Peet’s were combined in December 2019, leading to the launch of JDE Peet’s in early 2020.

Around the world, countries evolved strategies to navigate through the COVID-19 pandemic. This saw a significant boost in In-Home coffee consumption, but we were required to develop new and innovative strategies to meet the emerging challenges in Away-from-Home channels around the world.

In May 2020, we successfully completed our IPO – the largest IPO in the European consumer space in the last 15 years and the first large IPO to take place 100% virtually.

In September, Fabien Simon was named CEO of JDE Peet’s.

We relaunched our leading Senseo brand, with an industry-first compostable coffee pad containing 100% certified coffee and low-environmental impact appliances to create a truly sustainable offering for our consumers.

JDE Peet's created one of the largest instant coffee manufacturing facilities in the world near St Petersburg, Russia, by expanding freeze-drying capacity.

In November, we announced plans to invest EUR 110 million in our global supply network through the installation of new, high-speed aluminium coffee capsule production lines. The investment will increase our capsule production capacity by more than 60% to meet the rapidly expanding consumer demand for premium Single Serve coffee experiences.

Fitch assigned an investment grade rating to JDE Peet’s, underscoring its operating strength, strong financial discipline, and continued progress.

2020 was a challenging year for all of us at JDE Peet's. But we’re pleased to say that it was also a rewarding year in many ways. Here are just a few of our most important milestones:

Industry leaders Nestlé and JDE Peet’s join forces to launch nationwide coffee pod recycling scheme Podback in the UK.

Around the world, our employees rallied together to support those most in need. Through more than 130 local initiatives we donated 30 million cups of coffee & tea to food banks, health care professionals and other communities in need.

Annual Report 2020  —  JDE Peet’s N.V.   

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JDE Peet's at a glance

OUR STORY

A long and rich coffee & tea tradition which can be traced back more than 265 years.

Our purpose

Our Vision

Our Values

Our Belief

We unleash the possibilities of coffee & tea to create a better future

A coffee & tea for every cup

Discipline / Simplicity / Accountability / Solidarity / Entrepreneurship

It’s amazing what can happen over a cup of coffee or tea

In 1753 in Joure, the Netherlands, Egberts Douwe founded his first coffee outlet. Over a century later in 1895, in Bremen, Germany, Johann Jacobs opened his first grocery business. Then. in 1966 in Berkeley, California, U.S., Alfred Peet opened his first Peet's coffee store. Today we are the world’s largest pure-play coffee & tea company by revenue active in more than 100 markets around the world.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Around the world, our more than 19,000 employees live by our values everyday:

•We have the Discipline to stay focused on what matters and to achieve excellence by doing things the right way.

•Simplicity at all times means we choose the most straightforward paths to achieve our desired outcomes.

•We always step up with Accountability to take responsibility for our actions and ownership of our results.

•Together we make a bigger difference building trust and unity around shared interests in Solidarity.

•Our Entrepreneurship ensures we win the freedom to create and pursue more opportunities by staying agile, moving fast and resisting unnecessary bureaucracy.

Discipline

Accountability

simplicity

Solidarity

Entrepreneurship

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Annual Report 2020  —  JDE Peet’s N.V.   

JDE Peet's at a glance

Our global brands are big players in multiple markets which travel with one meaning and one global execution.

Our regional heroes have an international footprint with local nuances. We respect these local nuances which are based on cultural drinking habits, stage of category development and brand heritage.

Our local jewels are iconic in their local market. These brands leverage local culture and heritage, and are of true significance in their home country.

1753

1853

1895

1923

1937

1960

1966

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2004

2014

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Annual Report 2020 —  JDE Peet’s N.V.   

JDE Peet's at a glance

Brand Highlight

Rich and strong heritage since 1895

Our commitment to coffee mastery started in 1895 when Johann Jacobs roasted, blended and packed beans in his shop so that he could offer rich, quality coffee. We’ve been dedicated to mastering a rich aroma and taste ever since. That’s why we proudly top our coffees with our mastery crown.

Coffee drinkers have trusted the Jacobs brand and its magical pampering aroma for 125 years. This trust enabled Jacobs to establish itself as the leading coffee brand from Germany into 42 markets. Thanks to innovative products in filter coffee, coffee pods, whole beans, dissolving coffee and specialties, there is something for everyone. 

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

Created in France in 1992, the ambition for L’OR has always been to offer the best coffee in the world. In 2016, it transformed the market with it’s high quality aluminium capsules and exquisite blends. Today, the unequalled quality of L’OR coffee continues to seduce connoisseurs all over the world.

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JDE Peet's at a glance

Annual Report 2020 —  JDE Peet’s N.V.   

Brand Highlight

Alfred Peet introduced craft specialty roasting to the US in 1966. We continue to drive premium quality distinction through selective sourcing, hand roasting, artisan blending & superior freshness.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

Douwe Egberts started in 1753 in Joure, the Netherlands, where Egbert Douwes and his wife Akke Thijsses opened a grocery selling tea and coffee.

The strong heritage is what makes D.E a trusted brand to deliver the comforting qualities people have always known and loved, unleashing people’s innate potential to connect to each other. Douwe Egberts remains the leading coffee brand in the Netherlands today.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

The smartest brewing system for the highest convenience

Creamy latte, delicious cappuccino, intense espresso or even a hot chocolate. TASSIMO brews it at the simple touch of one button thanks to our INTELLIBREW™ Barcode Technology. Perfect, Easy, Every Time.

The right brew through our intuitive appliances

Through  our appliance partnership with BOSCH, we ensure the quality delivery of our drinks across all our appliances.

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JDE Peet's at a glance

Annual Report 2020 —  JDE Peet’s N.V.   

Brand Highlight

A partnership with Philips® since 2001 to offer to everyone A CUP OF FRESH COFFEE AT THE SIMPLE TOUCH OF A BUTTON

Compostable coffee pads, 100% certified coffee, low environmental coffee system

#1 single serve system in Western Europe with 15 million households

The entry point to single serve
with affordable price per cup & varieties of drinks

JDE Peet's at a glance

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Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

Launched in Australia in 1960 and in New Zealand in 1980 building a premium positioning around its distinctive glass jar.

Our coffee offers an experience that stimulates the senses, providing a moment of indulgent pleasure.

Moccona now has portfolio presence in all key coffee segments across retail and Out-of-Home.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

Customised to suit ASIA palate. A region of tea drinkers, unaccustomed to the taste of coffee. A combination of instant coffee, sugar and creamer was created to make coffee simple, inexpensive and customised to suit the Asian palate. 3-in-1 coffee comes across as an obvious invention; but it transformed coffee consumption in the region, and today is found in 25 countries globally.

JDE Peet's at a glance

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Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

Our Purpose: If you really take time for self and others; you give attention to what really matters in life

Pickwick as conversation starter; with different questions on each tea tag.

Loved by Dutch consumers and actively shared on social channels

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Brand Highlight

OLDTOWN is most known for popularising authentic White Coffee (a thick, creamy coffee from Ipoh Town).

Aside from introducing White Coffee mixes, OLDTOWN is known to have modernised the traditional kopitiam setting – creating a space that is cosy, casual and serves local fare.

Today, OLDTOWN has over 200 F&B outlets which span across Malaysia, Singapore, Indonesia, and Hong Kong.

The fare at OLDTOWN is made out of many local favourites meant to bring back fond memories.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

OUR APPROACH

Coffee & tea make the world go round. And every day, millions and millions of people enjoy coffee & tea products supplied by JDE Peet’s. But customers and consumers want to access our products in ways that align with their preferences. As such, it is essential that we reach out to them via the widest possible variety of channels. That’s why JDE Peet’s sells its full range of products through a go-to-market approach that covers the full spectrum of sales channels.

Consumer Packaged Goods: High quality coffee & tea experience at home

Out-of-Home: Unique coffee solutions for every occasion

As at 31 December 2020, the company operated 520 coffee stores under leading brand names including Peet's, Intelligentsia, Stumptown, OldTown, Coffee Company and 12Oz in the United States, China, Malaysia, the Netherlands and Italy. Our coffee stores play an important role in serving consumers high-quality fresh coffee & tea and also allow them to try new product offerings.

This is the way in which we reach hypermarkets, supermarkets, traditional trade markets and, in markets where they operate, buying groups.

Our consumer packaged goods (CPG) business offers the full range of coffee & tea products to meet consumer preferences and price partitions including

Out-of-Home coffee solutions are sold or rented to businesses and widely available within the B2B industry. These businesses include offices (including corporates), hospitals, colleges and universities, hotels, restaurants (including quick service restaurants), convenience and retail outlets, sports venues, cruise- and airliners.

We offer a full range of professional solutions and complementary coffee systems. They include proprietary liquid coffee concentrate technology; multi-serve coffee (roast and ground and whole beans); single-serve and double-shot coffee capsules; pads and pods; instant

pure and instant mixes; ready-to-drink coffee beverages. We also offer a variety of professional tea products.

instant coffee (pure and mixes), various single-serve formats, roast whole beans, roast and ground and ready-to-drink coffee beverages in addition to a variety of loose leaf and packaged tea products.

Coffee stores

Annual Report 2020  —  JDE Peet’s N.V.   

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JDE Peet's at a glance

Online sales channels: Convenience, choice and world class innovation

More and more consumers are turning to online sales channels for their coffee & tea needs. The COVID-19 pandemic further increased the sales channel in 2020 which experienced explosive growth. Over the last few years we have invested heavily behind this emerging sales channel allowing us to offer a wide portfolio direct to consumers via branded webshops and through leading third-party online marketplaces.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Revenues by segment

Unallocated sales are not included in one of the five operating segments as the company does not engage any business activities therein.

A complete list of countries that we operate in can be found under the section 'Consolidated Financial Statements, note 9.6', in this Annual Report.

CPG Europe - 52%

CPG LARMEA - 15%

CPG APAC - 10%

Peet’s - 13%

Out-of-Home - 10%

In 2020, the company's sales by segment comprised: 52% from CPG Europe; 15% from CPG LARMEA; 10% from CPG APAC; 13% from Peet's and 10% from Out-of-Home. The remaining sales are unallocated and primarily represent income generated from selling licensed products and renting available production facility space to third-party businesses.

JDE Peet’s is a global business fueled by a global supply chain reaching more than 100 countries around the world. However, we can only succeed by working at a regional and local level to truly understand the needs of customers and consumers, and to meet or surpass their evolving expectations. Our business is organised in five commercial segments taking into account coffee & tea cultures across different geographies:

1.CPG Europe

2.CPG LARMEA (Latin America, Russia, Middle East and Africa)

3.CPG APAC (Asia-Pacific)

4.Peet’s (predominantly U.S.) and

5.Out-of-Home (predominantly Europe)

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Annual Report 2020  —  JDE Peet’s N.V.   

JDE Peet's at a glance

The impact of COVID-19

As part of our growth strategy, we want to enhance our brands’ visibility online and continue to invest in our online sales channels.

We believe that the shift to online shopping is here to stay. However, the long-term effects on In-Home consumption are unclear and depend on whether or not working from home becomes part of a ‘new normal’. We anticipate that Away-from-Home coffee & tea consumption will bounce back to pre-COVID levels over time, but this will depend on whether consumers return seamlessly to their pre-pandemic routines.

COVID-19 has led to a significant decrease in Away-from-Home coffee consumption, with offices, hotels, bars,  restaurants and many of our coffee stores forced to close during lockdowns. Inevitably, with this has come a significant increase in coffee consumption In-Home as millions and millions of people across the world transitioned to remote working. As in many other consumer product categories, COVID-19 has accelerated the shift from buying coffee in physical stores to online shopping.

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JDE Peet's at a glance

Annual Report 2020  —  JDE Peet’s N.V.   

Consumers abandon the middle ground

Recent years have seen the global expansion of a café culture. Obviously, this increases the consumption of coffee & tea, but it also creates new consumer touch points. JDE Peet’s utilises these touch points to introduce consumers to new and different tastes, textures and concepts, expanding brand awareness and building stronger consumer relationships. This, in turn, can lead to consumers purchasing additional products through different channels. For instance, consumers will often buy their favourite coffee chain branded beans online.

Café culture is here to stay

In response to this emerging trend, we have tailored our growth strategy to expand our single-serve and whole-bean coffee subcategories.

Across the coffee & tea categories, consumers are increasingly fragmented in their choices. A trend that sees dramatically more consumers seeking premium products runs alongside the move to more people seeking value product propositions. Caught in the middle, the mid/mass market is declining. The result is a divergence in pricing opportunities as both premium product propositions (e.g., traceable and organic beans) and value products (e.g. instant coffees with creamer) become more prominent.

Reinforcing this fragmentation is the rise of millennials as a dominant consumer class. This generation is characterised by tastes and expectations that are distinctly different from their parents’ generations. Thus, millennials consume more coffee on-the-go and pay increased attention to innovation and product quality.

As part of our growth strategy, we have successfully increased the household penetration of Peet's in the United States.

Annual Report 2020  —  JDE Peet’s N.V.   

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JDE Peet's at a glance

Emerging markets, emerging growth

Access to consumer data delivers a competitive advantage in consumer product categories. Combined with AI-driven models and other data analytics techniques, this enables us to perform the real-time mapping and identification of shifts in consumer behaviour. We are then in a position to respond with more streamlined and efficient operations that deliver faster and more targeted innovation, along with higher levels of consumer loyalty.

Better data for a better experience

As the world becomes more prosperous, consumers in emerging markets are developing a taste for the coffee experience. The total spend on coffee is accelerating and we expect this to continue, driven by increased coffee consumption overall and an increased share Away-from-Home. There is every chance of this bringing large coffee chains to urban areas in these markets.

As part of our growth strategy, we want to build direct consumer relations through our own Direct-to-Consumer channels.

We are increasing exposure to, and driving growth in, emerging markets as part of our growth strategy, directly capitalising on this emerging trend.

Healthy opportunities

In recent years, consumers have become more aware of the health effects of the products they consume. Drinking coffee & tea in moderation is part of a balanced diet and healthy lifestyle.

At a time when consumer trends increasingly favour new beverage segments

with greater nutrient content, fats and sugar face both intensified consumer scrutiny and increased

A sustainable consciousness

For some years, consumers have grown more and more conscious of the impact their choices have on the environment and the well-being of others. As a consequence, they have been choosing more sustainable options such as responsibly

and fairly sourced coffees & teas, environmentally friendly packaging, and products with a limited or zero carbon footprint. Alongside these developments, governments across the globe are increasingly focused on this topic, especially regarding greenhouse gas emissions.

Through our corporate responsibility strategy, we directly respond to the growing focus on sustainability.

Through our Healthy Indulgence Programme, we continue our heritage of keeping consumer health at the heart of product development.

government attention. In response, countries such as Malaysia and Thailand have introduced a sugar tax.

Annual Report 2020  —  JDE Peet’s N.V.   

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JDE Peet's at a glance

JDE Peet’s operates in categories that touch almost every market in the world. All of these markets have their own traditions, trends and tastes, making the coffee & tea categories fascinating, complex and fast-moving. It is imperative that we respect this endless diversity by responding to external trends whilst also proactively shaping consumer tastes and habits where possible.

Within this context, we have put in place a strategic framework designed to generate sustainable and inclusive, profitable growth in the global coffee & tea categories in developed and emerging markets. This framework is built on three pillars:

Serving more cups

Master execution

Growing together

through a relentless focus on attracting customers

which fuels our growth from quality and discipline

by championing an inclusive ecosystem

Annual Report 2020  —  JDE Peet’s N.V.   

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Value Creation

1: Increasing the household penetration of the fastest growing coffee subcategories

3: Capturing attractive opportunities in the Out-of-Home sales channel

2: Increasing exposure to, and driving growth in, emerging markets

4: Building direct consumer relations through our own Direct-to-Consumer channels

Our growth strategy pursues four areas of opportunity:

The single-serve and whole beans subcategories have been the fastest growing segments of the coffee category. However, we believe we are yet to exploit their full potential globally. That’s why, for instance, we announced a EUR 110 million investment to expand our aluminium capsule manufacturing capacity. Investments such as this demonstrate our intent to pursue these growth opportunities through various offerings and product innovations in both existing and new markets, at different price points and across multiple brands. We can achieve this by building on the strength of our current brand portfolio. This portfolio enables us to be active in many different countries and to serve the whole spectrum of consumers from value seekers to super-premium.

We have seen emerging markets grow twice as fast as developed markets in recent years and expect this trend to continue in a post-COVID environment. In 2020, we derived 21% of our sales from emerging markets. We believe that the changing consumer trends and preferences in these markets, including an increase of consumption of coffee & tea as well as the premiumisation of the coffee & tea categories, present significant growth opportunities. Our growth strategy includes the expansion of sales in existing and new markets. For some time, JDE Peet’s has been significantly active in Brazil, Russia and South Africa. Over the last three years, JDE Peet’s has expanded its footprint in South East Asia with the acquisition of Super Group and OldTown. We plan to further strengthen our position in emerging markets, in particular in China with our joint venture partner HillHouse Capital.

Although we have a solid position in the Out-of-Home sales channel, we believe we are well positioned to capture the opportunities of the COVID-19 rebound. We intend to seize these opportunities by offering full coffee & tea solutions to customers. This applies particularly to non-commercial customers where coffee solutions are provided as a service. At the same time we will leverage our portfolio of brands (including Peet's, L'OR and Jacobs), our direct go-to-market approach, and our ability to enhance the customer experiences and its operational efficiencies through its IT platforms.

COVID-19 has substantially boosted an already pre-existing growth in online coffee purchases. In many regions we have seen a substantial rise in the number of people working from home, and a subsequent increase in In-Home coffee & tea consumption. Consequently, we are serving more consumers through our own Direct-to-Consumer channels such as peets.com, tassimo.com and lorespresso.com. The growth in direct relationships with our consumers has and will continue to enable innovative new connections and the creation of more personalised offerings.

Annual Report 2020  —  JDE Peet’s N.V.   

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Value Creation

Solid and responsible. Our Corporate Responsibility framework

The growth strategy outlined above is built on a solid corporate responsibility framework. At JDE Peet's, we recognise that our business activities impact the environment and the communities in which we operate. Sourcing our raw materials responsibly, taking care of the environment, and engaging our own employees and communities are

all important principles that guide our business activities.

Within this context, our corporate responsibility strategy focuses on those issues that are most material to our business and where we can have the greatest impact given the reach of our operations, supply chain and value chain.

common grounds

minimised footprint

connected people

Addressing the priority issues in our supply chain

Reducing our environmental impact step-by-step

Engaging our employees
and our communities

Working towards 100% responsibly sourced coffee, tea & palm oil by 2025

Designing 100% of our packaging to be reusable, recyclable or compostable by 2025

Targeting gender-balanced management positions
by 2025

More information can be found under the section ‘Material Steps towards Value Creation and Corporate Responsibility’ in this Annual Report. In line with feedback from our stakeholders, our corporate responsibility strategy is underpinned by a commitment to Responsible Business Practices and is built on three pillars:

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Annual Report 2020  —  JDE Peet’s N.V.   

Value Creation

We Unleash the Possibilities of Coffee & Tea to Create a Better Future

At JDE Peet's, we are driven by our passion for coffee & tea, care for the environment, and respect for people. We take responsibility for our supply chain - from bean to cup - and the communities in which we operate. Through our brands, we offer an extensive range of high-quality innovative coffee & tea products and solutions, across consumer tastes and preferences as well as price points.

By offering more people around the world access to higher quality coffee & tea experiences, we create long-term value beyond financial performance. Our approach

is to optimise value through the disciplined execution of our growth strategy in a culture of pride and performance that grows our business and people in a sustainable manner. We strive to continuously improve the way we do business to benefit our customers, consumers, employees, shareholders and society at large while taking good care of our environment.

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Annual Report 2020  —  JDE Peet’s N.V.   

Value Creation

Our value creation model is based on the Integrated Reporting Framework, issued by the International Integrated Reporting Council (IIRC). This model builds on the following structure:

Our value creation model

–Outputs: every type of output resulting from our operations.

–Impact: the impact that we have on our stakeholders and our contribution to the achievement of the United Nations Sustainable Development Goals (SDGs).

–Inputs: the resources and marketing approaches that we need and use for our operations.

–Activities: the activities that we perform in order to operate in a distinguished way from our competitors and to achieve the goals that we have set for ourselves.

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Annual Report 2020  —  JDE Peet’s N.V.   

Value Creation

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Financial

•EUR 20.7 bn total assets in 2020

•EUR 252 mln capex in 2020

input

The Value we share

Materials

•8% of the world’s coffee,
<1% of the world’s tea

•Packaging which maintains the freshness and quality of coffee and tea

Go-to-Market

•Distribution across all channels

•Active in more than 100 markets around the world

Infrastructure & Technology

•44 manufacturing facilities globally

•Operating across all coffee & tea technology platforms

Portfolio of Brands

•Owner of the largest portfolio of coffee & tea brands with offers across price points

• 78% of revenue from #1 or #2 positions in CPG and Out-of-Home markets

Talent

•A global team of 19,000+ employees across 80+ nationalities

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Annual Report 2020  —  JDE Peet’s N.V.   

Value Creation

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Activities

What makes us special

Annual Report 2020  —  JDE Peet’s N.V.   

Our purpose

Our Vision

Our Values

We unleash the possibilities of coffee & tea to create a better future

A coffee & tea for every cup

Discipline / Simplicity / Accountability / Solidarity / Entrepreneurship

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Value Creation

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Products

•4,500 cups of coffee & tea served every second

•Wide portfolio of brands and product choices that is accessible wherever the consumer is, through whatever channel they buy, in any format/taste they prefer, at different price points

Output

The value we create

Financials

•EUR 6.7 bn total sales

•EUR 1.3 bn total adjusted EBIT, 6.2% organic adjusted EBIT growth

•EUR 877 mln free cash flow

Communities

•380,000 smallholder farmers reached across 19 countries

•30 million cups of coffee and tea donated

Customer/Consumers

•In-Home organic sales growth of 9.1%

•Ranked “top tier” in 71% of our markets for Driving Category Growth in 2019 Advantage Survey

Materials

•29% third-party certified/verified coffee, 22% tea, 31% palm oil

•87% packaging designed to be recyclable, reusable or compostable

Talent

•Employees engaged and inspired by development and growth opportunities

•An inclusive, diverse work environment

•A resilient team adapting to global changes

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Common Grounds

Together with our partners, we continuously improve the social and environmental conditions in origins where coffee, tea and palm oil are grown.

Minimised Footprint

We are working hard to reduce our environmental footprint while providing quality products that meet the needs and preferences of our consumers and customers.

Connected People

We give back to the communities where we live and work based on our belief that effectively operating our business also means being a good corporate citizen and a good neighbour.

Impact

What we employ

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Behind every cup of JDE Peet’s coffee & tea is a wide range of stakeholders. They range from our customers and consumers through to our employees, investors and credit agencies, and the farmers who grow the beans and leaves. Whilst sharing a common desire to see JDE Peet’s succeed, each stakeholder brings

We engage with our stakeholders on many levels, both within our organisation and throughout our value chain. Forms of engagement include regular stakeholder dialogue and engagement by members of our Executive Committee.

To enhance our societal impact, we actively engage with organisations such as the Global Coffee Platform, the Sustainable Coffee Challenge, the European Coffee Federation, Rainforest Alliance, World Coffee Research, the Ethical Tea Partnership, CEFLEX, RECOUP or the One Planet Business for Biodiversity (OP2B) coalition. These partnerships form a central pillar of our stakeholder engagement so that we effectively address the broader sustainability challenges which go beyond our immediate supply chain.

A more detailed outline of our engagement with stakeholder groups can be found on the next page. More information on how we respond to stakeholders' needs and concerns can be found under the section "Our Performance" in this Annual Report.

a unique perspective. We therefore maintain regular and ongoing interaction with all of them. This allows us to draw on their expertise in order to improve and set priorities for long-term strategy for value creation, and to better anticipate risks.

•Our customers and consumers

•The farmers and their workers who supply our coffee & tea

•Our direct suppliers

•Our employees

•NGOs

•Industry peers

•Governments

•Investors, including our shareholders, and the financial institutions and credit and ESG rating agencies we do business with

As part of a materiality assessment process (see section below) we identified the following stakeholder groups:

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Value Creation

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To guide our approach, we collaborated with BSR, a global business network and consultancy focused on sustainability. We identified, scored and prioritised issues using the following methodology:

1.Identify material issues: A comprehensive list of issues was identified and determined through a sector analysis, review of sustainability reporting standards and company priorities and strategies.

2.Determine importance to business: In order to determine their relative importance to business, each issue was assessed according to its impact

on JDE Peet’s’ brands and reputation, growth, employee engagement, operational efficiency and product quality and innovation. Key internal stakeholders provided input via in-depth interviews with JDE and Peet’s leadership as well as surveys to a broader audience of colleagues in both businesses.

3.Determine importance to external stakeholders: In order to determine their relative importance to external stakeholders, each issue was assessed according to its importance to various stakeholder groups: business partners, NGOs and civil society, shareholders/investors, customers, and governments/regulators. In-depth interviews were conducted with external stakeholders spanning our key stakeholder types: coffee farmer representatives, coffee traders, customers, NGOs, certification bodies, industry groups, investors, coffee value chain experts, and multi-stakeholder collaborations.

4.Prioritise: We mapped scores for each issue, taking into account business and external stakeholder importance, which identified the priorities presented in our materiality matrix.

In 2020, we completed our first comprehensive materiality analysis as a company. This was an important tool for informing our corporate responsibility strategy. It also identified our priorities according to their importance for external and internal stakeholders as well as their impact on our business success. The results of the process were reviewed and discussed comprehensively by our Corporate Responsibility Governance Committee.

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Importance to business success

Importance to External Stakeholders

our materiality map

Very high

High

Common grounds

Minimised Footprint

Connected People

Responsible Business Practices

Moderate

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The material topics are linked to the three pillars of our corporate responsibility strategy, our underlying commitment to responsible business practices and our evolving business model. The distribution of topics on our materiality map, across three distinct tiers, informs our approach to value creation for our company and society and helps to integrate our business and sustainability priorities with the United Nations Sustainable Development Goals.

The first tier is made up of the topics most material to our external stakeholders and the company’s business success. They form the core of our corporate responsibility strategy. The seven top priorities emerging from the assessment are listed below:

The topics on our materiality map do not exist independently. Climate change mitigation, for instance, is closely linked to other topics such as sustainable agriculture, farmer livelihoods, operational resource efficiency, and sustainable packaging. The wider topic of human rights is intimately connected to responsible supplier labour practices and ethics and governance. As a result, some of the topics on our materiality map are addressed in multiple sections of this report. The definitions of material topics can be found under section 'About this report' in this Annual Report.

The second tier is a cluster of major topics for creating medium and long-term value, including farmer livelihoods, operational resource efficiency or human rights. This tier also includes most of the topics related to our employees. A talented pool of engaged employees is critical if we are to thrive as a business and effectively address other topics on our materiality map.

The third tier of topics is devoted mainly to compliance-driven matters. These topics are addressed through compliance, monitoring and ongoing management.

•Climate change mitigation

•Ethics and governance

•Product quality

•Responsible supplier labour practices

•Supply chain transparency

•Sustainable agriculture

•Sustainable packaging

Our top 7 priorities

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Value Creation

To determine our contribution to the 17 SDGs, we used their specific targets and KPIs3 and assessed the extent to which we contribute to these through our operational management, internal policies, corporate responsibility strategy and initiatives and supply chain programmes. We identified three levels of contribution:

1.JDE Peet’s contributes to a significant extent to those SDGs that are linked to our most material topics and on which our business activities and initiatives focus accordingly.

2.JDE Peet’s contributes to some extent to these SDGs mainly as a result of our programmes to increase livelihoods in our supply chain, minimise our footprint and ensure to provide a fair, safe and diverse working environment to our employees.

3.JDE Peet’s contributes to a limited extent to some targets set for those specific SDGs.

As a result of this analysis, we believe we make the strongest contribution to the following SDGs:

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Value Creation

Significant contribution:

SDG 1 - No Poverty

Through Common Grounds, we work to improve the productivity, profitability and sustainability of smallholder farms. This directly addresses many of the priorities on our materiality map and strengthens the resilience of our supply chains. JDE Peet's is also a founding member of the IDH Farmfit Fund which aims to increase the incomes of 3-5 million farmers through input loans, working capital and renovation and rehabilitation.

SDG 8 - Decent Work and Economic Growth

The prosperity of farmers is one of the three pillars of our Common Grounds responsible sourcing programme. Many smallholder farmers still earn low incomes, driven by a combination of low farm productivity and small farm sizes. In turn, these factors often impact the conditions under which our raw materials are grown and the agricultural practices that are used.

Our aim is to generate economic value while respecting the environment and the people involved throughout our value chain. Through Common Grounds we work to strengthen the sustainability of our entire value chain. We acknowledge the risks and challenges related to labour practices that may arise in certain parts of our supply chain and actively work to continuously strengthen responsible supplier labour practice in partnership with our suppliers, civil society, governments and others. Our employment practices are guided by the conventions set by the International Labour Organisation (ILO) regarding minimum age and the worst forms of child- and forced labour. It is our responsibility as an organisation to provide a safe working environment for all our employees.

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SDG 12 - Responsible Consumption and Production

on topics such as water stress and climate resilience.

Within our own operations we are rethinking the ways in which we package our products to reduce the amount of packaging material and to increase recycled content. Our aim is to design all of our products to be recyclable, reusable or compostable by 2025. We also continuously work to minimise our environmental footprint by focusing on a more efficient use of water and energy, and a sound waste management system.

SDG 13 - Climate Action

SDG 17 - Partnerships

Supporting the communities along our value chain and protecting their natural environment is important to us. We do so by creating partnerships between motivated farmers, cooperatives, exporters, traders, coffee roasters, civil society, and governments. These partnerships bring together the strengths and capabilities that will make us more effective in reaching out to the smallholder farmers in our supply chain.

Climate change poses a direct threat to the livelihoods of many smallholder coffee & tea farmers and has the potential to impact the long-term supply of coffee & tea. We are currently updating our climate strategy, including a more detailed mapping of our GHG emissions and refined roadmaps to deliver GHG emission reductions across the entire value chain. We will release further information on those efforts later in 2021.

Through Common Grounds we support smallholder farmers to build their resilience to climate change while minimising the environmental impacts of coffee production. The challenges are geographically specific and require a participatory approach designed to address the issues locally at farm level right up to the landscape approach.

At the source, partnerships help to empower smallholder farmers to make informed long-term choices: choices that are good for them, good for the people who work with them to produce and harvest their products, good for the environment, good for the long-term sustainability of coffee & tea. And, ultimately, good for our business.

At JDE Peet’s we believe in our responsibility to manufacture our products in a responsible way and in our ability to promote sustainable consumption to our customers and consumers. We recognise the pressures of our operations on scarce natural resources and we are committed to an efficient use of natural resources along our entire value chain, in line with the priorities identified in our materiality assessment. We are working towards our targets of 100% responsibly sourced coffee, tea and palm oil by 2025. Alongside this we promote sustainable agricultural practices to the farmers we work with and raise awareness

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Some contribution:

SDG 5 - Gender Equality

We believe that a diverse, inclusive culture makes us stronger. Yet we recognise that there still is a gender gap in today’s business world. JDE Peet’s targets gender balance across its management positions by 2025. JDE Peet’s also provides a work environment where no form of discrimination or harassment is tolerated.

Additionally, women and the young are heavily engaged in coffee & tea farming activities, yet often have limited access to training and extension services. Our Common Grounds projects aim to address these challenges by increasing both the opportunities for women and young people to benefit equally.

SDG 6 - Clean Water & Sanitation

Even though the manufacturing process of our coffee & tea products is not very water intensive overall, the production of instant coffee is. As part of our Minimised Footprint strategy, we are committed to the careful use and sustainable management of this precious resource. In our supply chains, sufficient clean water availability is key to the sustainable development of largely agricultural, rural based economies. Common Grounds projects use various approaches to raise awareness and transfer knowledge and build capacity for water-saving techniques among smallholder farmers.

SDG 10 - Reduced Inequalities

We aspire, through our business activities, to contribute to the reduction of inequality within the countries in which we operate by helping the most vulnerable communities, including many smallholder farmers. In partnership with our suppliers, non-profit organisations, governments, and competitors, our Common Grounds programme engages in a cycle of continuous improvement to ensure the socio-economic inclusion of farmers and their improved livelihoods and incomes. For example, we are proud to be part of the programme ‘Improving the lives of women and children in Assam’s tea communities.’ This programme addresses a number of complex social and environmental issues in tea communities, catalysing transformational change that improves the lives of tea workers and farmers.

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External Trends

•The impact of COVID-19

•Consumers abandon the middle ground

•Café culture is here to stay

•Emerging markets, emerging growth

•Healthy opportunities

•A sustainable consciousness

•Better data for a better experience

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Value Creation

2020 was a tumultuous and challenging year. Entire sectors such as hotels, restaurants, and cafes, as well as offices had to close as a result of the lockdowns and restrictions imposed by governments around the world due to the COVID-19 pandemic. As a consequence, Away-from-Home coffee & tea dropped significantly while In-Home coffee & tea consumption saw strong growth. The fact that our business spans all coffee & tea categories while covering all channels enabled us to be extremely resilient.

In-Home organic sales grew by 9.1% offsetting the steep decline in Away-from-Home consumption. Our pure-play coffee & tea focus, our premiumisation strategy and a disciplined approach to cost management delivered an organic increase in adjusted EBIT of 6.2% despite the volatility of 2020. At the same time, we were able to decrease our leverage to 3.2 times EBITDA compared to 4.2 times EBITDA at the end of 2019.

Similarly, we made progress in many areas of our corporate responsibility journey despite the challenges posed by the COVID-19 pandemic. For instance, we increased the share of responsibly sourced coffee. We also significantly increased the number of smallholders we reach through our collaborative programmes with suppliers, civil society organisations, governments, and others. This was despite the difficulties of supporting smallholders during a pandemic.

By establishing some firm and stretching targets we renewed our commitment to sustainable packaging, and we reduced the energy and water intensity of our manufacturing operations. We are especially proud to say that our employees carried out more than 130 community initiatives in more than 30 countries. They donated coffee & tea to our long-standing foodbank partners and handed out millions of free cups of coffee & tea to front-line healthcare professionals. JDE Peet’s will always be grateful to those who have worked tirelessly throughout the year to save lives.

Yet, we have a long road ahead of us in our corporate responsibility journey. Together with our partners and stakeholders, we will work hard to make further progress against our commitments in the coming years.

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Our Performance

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An ‘instant’ success becomes a long-term powerhouse

20 years ago, in November 2000, we received Russian Government approval to start production at our manufacturing facility near St. Petersburg, Russia. Shortly afterwards, in January 2001, the first tin line of the small packaging facility began to operate in three shifts, packing our Jacobs Monarch and Maxwell House brands.

Our St. Petersburg plant turns 20

The site was an ‘instant’ success and has gone from strength to strength. In 2008, when the first freeze dryer was installed, the plant started full-cycle instant coffee production. By 2020 it had grown to be a leading instant coffee manufacturing facility. And there was more to come as 2020 marked another extraordinary milestone on this growth journey.

To meet growing demand for our instant coffee, we wanted to expand freeze-drying capacity. However, the restraints and travel bans imposed by COVID-19 made it impossible to bring in the necessary foreign specialists.

Aerial view of our St. Petersburg manufacturing facility

A case study

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Our Performance

A case study

“These twenty years, the development of the plant has never stopped. We continue to upgrade the equipment, expand capacities, release new products and develop our team. A huge thanks goes to the people who work at the plant. Every day, in good times and in bad times, they make coffee loved by millions!”

— Andrey Kutsenko, plant director in 2020

Anything is possible

Instead of waiting for the pandemic to pass, the Russian engineering team took the bold decision to expand capacity and start up the equipment with local resources instead and with the remote support of the foreign specialists only. Assisted by the installation of cameras for the remote monitoring of the equipment and processes, 4G network coverage, and virtual control rooms, the added capacity began operation in July 2020, only one month behind the original schedule.

Camera-supported monitoring of the equipment

One of the world's biggest

Today, our St. Petersburg manufacturing facility employs more than 500 people. With our expansion of freeze-drying capacity, it is now one of the world’s largest instant coffee manufacturing facilities. As part of our investments in 2020, we also further increased the energy and water efficiency of our operations, with additional measures planned for the coming years to continue on our sustainability journey in manufacturing.

With its modern freeze-drying processing lines and equipment, our St. Petersburg manufacturing facility will continue to supply high-quality coffee for our consumers in Russia and abroad.

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Our Performance

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Sourcing our raw materials responsibly

“Our partnership with JDE is all about bringing long-term sustainability to coffee and tea farmers in key producing regions. The Common Grounds programme offers an innovative approach based on engaging suppliers, jointly identifying high risk areas, and implementing improvement projects that help mitigate these risks and advance sustainability progress in key sourcing origins. By working together on responsible sourcing solutions that complement certification, the Rainforest Alliance partnership with JDE is a powerful vehicle to accelerate sector innovation and scale up impact.” 

—  Aparajita Bhalla, Senior Director Markets Transformation, Rainforest Alliance

Our Performance

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Common Grounds is built around three thematic areas:

Sustainable agricultural methods that contribute to protecting the natural environment and biodiversity and to addressing climate change.

Responsible supplier labour practices that improve working conditions and promote equal opportunities as well as supplier diversity, in particular addressing the needs of women, children and youth.

Building the capabilities that are needed to make farming economically viable and that improve farmer livelihoods.

Our Performance

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Essential relief in Honduras

JDE has a long history with Honduras as a key sourcing origin. Since 2013, we have worked with our partners to directly reach over 20,000 smallholder coffee farmers and their communities. Under the Common Grounds programme, The Coffee Alliance brings together CoHonducafe, Fundacion CoHonducafe and USAID to: promote sustainable coffee production, protect natural resources, improve socio-economic development, and foster climate change resilience.

In November 2020, The Coffee Alliance provided essential relief for smallholder coffee farmers and their families following Hurricanes Eta and Iota in Honduras. Activities included support with clothing, food, biosafety kits and personal care kits in the most affected areas (Lima, Chamelecon, San Pedro). The programme also carried out boat rescue missions and provided basic medical assistance, reducing the incidence of diseases.

A case study

JDE increased its commitment to The Coffee Alliance to further support repairing the houses of coffee producers, increasing technical assistance for more than 5,000 families, restoring coffee processing facilities, strengthening logistics to face post-hurricane challenges and restoring at least 200 model farms to revitalise and strengthen coffee production as a key source of income in the affected regions.

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Our Performance

Collaborative steps towards sustainability

Many smallholder farmers are not part of formal cooperatives and are currently beyond the reach of sustainability certification. Moreover, many sustainability challenges are complex and go beyond what an individual producer or cooperative can address. These challenges require systemic change and take multiple years to solve. Accordingly, we believe that the best way to improve coffee & tea sustainability is to drive continuous improvement through partnerships among farmers, cooperatives, exporters, traders, roasters, civil society, and governments.

Common Grounds works with stakeholders to identify the most important social and environmental issues wherever we source our coffee & tea. We then address those issues through collaborative action and open, direct communication with our suppliers. After identifying the local priorities, we work in partnership with our suppliers, NGOs and governments to address the challenges faced by smallholders.

Our Performance

Tackling poverty and the pandemic

The need for Common Grounds is more urgent than ever. Poverty among smallholder farmers is still widespread and the COVID-19 pandemic has only added to the economic pressure for many of them. Border closures, trade restrictions and confinement measures prevented farmers from accessing markets, buying inputs and selling their produce. Agricultural workers were also at risk of increased exploitation as a result of border closures, increasing unemployment, and access to basic necessities. Coffee farmers in Uganda and Ethiopia, for

example, reported lost income from coffee farming as a result of restrictions on movement and transport.

Environmental disruption

Deforestation and biodiversity loss are also a problem in many regions. This is compounded by extreme weather such as more frequent droughts and heavy rains. In November 2020, for example, Hurricanes Eta and Iota affected some 5.2 million people across Central America, according to United Nations estimates. Government estimates suggested that more than 10,000 hectares of coffee farmland have been completely or partially damaged in Honduras and Nicaragua, negatively impacting the livelihoods of countless smallholders and

agricultural workers in those countries.

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At JDE Peet's we are working towards 100% responsibly sourced coffee, tea and palm oil by 2025.

Our Performance

Coffee farmers in Uganda

We recognise the investments farmers are making in committing to sustainable production via third-party certification or verification programmes. That's why coffee, tea and palm oil that carry a third-party certification or verification form an important pillar of our responsible sourcing strategy. On coffee, we have set the goal of 40% third-party certified or

verified coffee purchases by 2025 as part of our responsible sourcing commitment.

To further support sustainable production of our raw materials, we are also committed to  directly reaching 500,000 smallholder farmers by 2025.

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Innovative, far-reaching initiatives

We work to address these challenges through a cycle of continuous improvement in multi-year projects. These are implemented in close partnership with our suppliers, as well as with farmers, cooperatives, exporters, traders, civil society and governments. Today, we have projects in place across all the 15 Common Grounds coffee origin countries. They focus on the identified priorities and vary by country. They include, for example:

•Global Coffee Platform Collective Action Initiatives in Brazil and Vietnam to foster the responsible use of agrochemicals

•Smallholder training in Indonesia that aims to decouple coffee production from encroachment and deforestation in the neighbouring national park; and

•Efforts to address child labour in Honduras

More details can be found in the case studies on the following pages.

Coffee: Continuous improvement in the supply chain

In 2020, we were able to increase our third-party certified or verified coffee purchases to 29% globally, up from 21% in 2019. In addition, we want to engage the many smallholder farmers who are currently beyond the reach of sustainability certification. That’s why JDE launched Common Grounds in 2018. Today, Common Grounds covers 15 of our most important coffee origin countries, from which we sourced more than 90% of coffee in 2020.

The Common Grounds programme started with Origin Issue Assessments across nine coffee origins and with self-assessments from 54 of our key suppliers. This represented a 60% response rate against our Coffee Sourcing Principles. As a further step in our due diligence process, we commissioned seven on-the-ground country risk assessments by independent third parties.

A great response

In the 2019/20 cycle we received 145 self-assessments from our suppliers representing a 95% response rate. Despite the limitations imposed by the COVID-19 pandemic on our country risk assessment process, we worked with the Rainforest Alliance to successfully conduct or update independent Origin Issue Assessments in 5 priority countries.7 This means that two-thirds of our conventional coffee purchases8 in 2020 were covered by both a supplier self-assessment and Origin Issue Assessment. This process has equipped us and our suppliers with a much deeper understanding of the most pressing sustainability challenges in each origin country.

Looking forward

In 2021, we will launch the third cycle of Common Grounds Supplier Self-Assessments, focusing on further improvements in reach and quality of the process, alignment with our Coffee Sourcing Principles, and identification of key sustainability challenges. This cycle will further inform and enhance both our supplier engagement strategy as well as the continuous improvement approach of addressing priority issues in our supply chain.

7 Available in the Common Grounds section of our JDE website

8 I.e. coffee without a third-party sustainability certification or verification

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A case study

Re-engineering the supply chain

Responsible Sourcing at Peet’s

The cost of the field surveys is covered by Peet’s, not farmers, and pertains to its entire farm footprint, rather than a certified subsection. Work to address social, environmental, and economic issues is undertaken by Peet’s, their suppliers, and critical collaboratives like World Coffee Research, after which Enveritas takes the added step of assessing if impact is being achieved or

if interventions need to be rethought.

Peet’s believes these efforts represent an honest and earnest contribution to a more sustainable coffee sector. In 2020, Enveritas verified 80% of Peet’s total coffee purchases.

In a pioneering partnership with Enveritas, Peet’s has developed a rigorous approach to understanding its coffee supply chain. The process dramatically increases field surveys and utilises robust statistical analysis and geo-spatial innovations to gain an unbiased understanding of conditions in the supply chain, from the arid mountains of Yemen to the highland forests of Sumatra.

Coffee highlands, Lake Toba, Sumatra

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Our Performance

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"JDE's commitment to the coffee communities of Honduras remains strong. For this, we are deeply grateful and proud to work together to improve opportunities for children, youth and their families."

— Jorge Galeano, National Director for World Vision Honduras

A case study

Creating safe places for children to learn

That same year, we created five childcare and development centres, focusing on education, sensitisation and child protection. Beyond the simple objective of eliminating child labour, the project works by providing parents with the reassuring knowledge that their children are in safe hands during the day.

In 2020, we reassessed the risk of child labour and determined that COVID-19 exacerbated the problem, thereby requiring us to increase our efforts with the local Protection Committees, the Municipal Council, and the Childhood and Youth Office, ensuring that each entity fully understands its role for the functionality of the childcare centres.

"On behalf of ADECAFEH, I would like to thank JDE for their support since 2018 of our project ‘Prevention of Child Labour During the Coffee Harvest’ in the coffee-producing community of San Juan, Intibuca. The impact of the daily childcare and education programmes is well documented. The children’s academic index and their overall development have increased substantially, along with their parents’ income. The parents can now proceed with their daily work knowing their child is in professional hands."

— Daniel Gerber, Chairman ADECAFEH

Children at one of the programme's childcare centres

Addressing a priority in Honduras

Through Common Grounds and its risk mapping process, JDE and the Rainforest Alliance determined in 2018 that child labour was a priority risk in Honduran coffee production. Accordingly, we partnered with the Asociación de Exportadores de Café de Honduras (ADECAFEH) and World Vision to establish the project 'Prevention of Child Labour During the Coffee Harvest'.

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Our Performance

Towards an Integrated Coffee Extension Service

As further evidence of success, many CCBFs are being taken on by Government or private coffee companies to continue providing coffee advisory services to farmers, creating income earning opportunities in the communities. Programme-trained CCBF Ms. Adrine Natukunda, popularly known as the 'Rubirizi District Coffee Queen', for example, is now engaged by the

Government of Uganda as a coffee service provider and supports a local coffee trading company as a coffee farm inspector in her district.

Delivering coffee advisory services to 40,000 smallholder coffee farmers in Uganda

Since 2018 JDE, IDH - the Sustainable Trade Initiative and Café Africa Uganda have partnered to test a model of linking private Coffee Community Based Facilitators (CCBFs) to the public agricultural extension system, combining private community outreach with district knowledge and infrastructure.

After three years of implementation, the programme has reached more than 40,000 smallholder coffee farmers in 6 districts in Uganda. It successfully demonstrated that CCBFs complement the district infrastructure with effective farmer-to-farmer training. The model is now adopted to significantly increase extension outreach without the need to grow government extension services.

“My rehabilitated coffee garden serves as a community demo, and the hands-on practical training approach, use of local language during training and matching the trainings with the coffee calendar, have made me a popular CCBF in Rubirizi.”

— Ms. Adrine Natukunda

A case study

Field training in Uganda

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A case study

JDE committed to sourcing coffee from the first 'SourceUp compact' in Vietnam.

We source coffee from the beautiful Central Highlands of Vietnam. In recent years, we have addressed key sustainability challenges such as extreme climate events, recurring droughts, and the responsible use of agrochemicals to reduce GHG emissions through a landscape programme.

Partnering with IDH - the Sustainable Trade Initiative, our key suppliers, the public sector, farmers and development partners (the World Bank, USAID, UNDP), this EUR 11 million programme has achieved 20% savings in water consumption and reduced fertiliser input. Further, it has has recorded no use of

banned pesticides, and no observed deforestation in the area.

Building on this success, we recently applied IDH’s innovative SourceUp model and entered into a PPI (Production - Protection - Inclusion) compact. This is an agreement between the programme’s public, private and civil society stakeholders to improve livelihoods by making the land more productive, in exchange for the protection of the natural ecosystem. Coffee from the compact is fully compliant with EU limits on glyphosate residue and comes with a 60% lower carbon footprint in 2019/20 compared to the 2015/16 crop. A recent evaluation showed a 20% increase in the income of farmers in the PPI compact

“The investment succeeded because it was well supported by farmers and matched the needs of the public and private sector.” 

— Mr. Y Giang Gry Knie Knong, Vice Chairman of Dak Lak Province

“For almost ten years, all coffee products originating from our PPI compact in Krong Nang district have always met the market requirement of Glyphosate residue. I attribute this success to the fruitful partnership with IDH, JDE, local authorities, and especially farmers. JDE is our committed buyer.”

— Mr. Nguyen Tien Dung, Sustainability Manager of SIMEXCO

compared with farmers outside of the intervention area. The increase is mainly attributed to better input management and intercropping, i.e., growing coffee together with other crops in the same field.

We are proud to be the first company to use the SourceUp platform to inform our coffee sourcing decisions. The programme’s success has already triggered commitment from local partners to expand to 140,000 hectares by 2025 in a similar approach.

Dak Lak and Lam Dong districts have set a vision to become official Verified Sourcing Areas. With this sourcing commitment, JDE is proud to be able to help the provinces on their path to a more sustainable future.

Coffee farmers in Vietnam

Our Performance

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A case study

Tea - our responsible sourcing journey

Overall, 22% of our tea volume was responsibly sourced through a third-party certification or verification in 2020. We remain committed to our goal of working towards sourcing all our tea responsibly by 2025.

As in previous years, all of our purchases for our Bell Tea, Pickwick, Hornimans and TiOra brands carried a third-party certification or verification. In 2018, we acquired Ofçay and tea sold under the Ofçay brand is not yet covered by a responsible sourcing programme. We are actively working with partners to develop such a programme that fits the specific needs and local context of Ofçay.

In 2020, we continued our support of tea farmers and their workers across 4 projects in 4 countries. These projects addressed key issues on child labour, working conditions, gender, living income and healthy diets for tea communities. They include, for example, projects with the Ethical Tea Partnership (ETP) to reduce the living wage gap through the Malawi Tea 2020 programme and improving opportunities for women and girls in Assam, India.

Promoting education for healthier lives

JDE is one of the eight tea companies co-funding the programme Healthy Diets for Tea Communities (2020-2023). This coalition, led by the Global Alliance for Improved Nutrition (GAIN) and the Ethical Tea Partnership, addresses poor nutrition in tea supply chains in Assam (India), Kenya, and Malawi.

Poor diets are the leading cause of global ill health and a driver of under-nutrition and deficiencies. Tea workers and farmers often suffer from high under-nutrition rates because their diets consist largely of staples such as rice, bread, maize and wheat. These foods lack the essential nutrients and vitamins needed for good health and an active life.

The programme works on different areas in each country context, but focuses on:

•Increasing demand for nutritious foods through interactive and educational activities which improve food knowledge and choices. Activities include training, street theatre or cooking demonstrations

•Increasing access to nutritious food through a variety of methods, including vegetable gardens, fruit trees and fortified lunches at work

•Improving the enabling environment by promoting the importance of investing in workforce nutrition programmes to businesses and governments

In Malawi, the Healthy Diets for Tea Communities programme is working with farmers to help improve diets and nutrition. Given the high costs of fortified foods these are sometimes inaccessible to farmers. Through training sessions, farmers therefore learn about the benefits of growing bio-fortified crops such as orange fleshed sweet potatoes themselves as well as how to grow them, covering topics such as the correct spacing, fertiliser and access to the seeds.

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Palm-based oils: Towards 100% responsible sourcing

The large majority of our products do not contain any palm oil or palm kernel oil and our purchase volume of palm-based oils is relatively small at approximately 10,000 tons. Historically, all of our palm oil and palm kernel oil purchases were certified.

However, recent acquisitions required us to recommence our journey to 100% responsibly sourced palm oil with the first Roundtable on Sustainable Palm Oil (RSPO) certified palm oil shipment for this acquisition in November 2019. Since then, we have been able to increase our total purchases of RSPO-certified volumes from 11% in 2019 to 31% in 2020. We also recently updated our purchasing principles for palm-based oils and will continue on our journey towards 100% responsibly sourced palm-based oils by 2025, with an expectation to meet this goal several years earlier than planned.

Smallholder engagement: Further outreach and expansion

Our smallholder engagement programme is designed to address the priority sustainability challenges and improve the livelihoods of smallholder farmers. In 2020, we supported more than 40 coffee & tea projects across 18 countries. We have now reached 380,000 smallholder farmers since 2015 and are well on track to reach our goal of 500,000 smallholder farmers by 2025, primarily through

COVID-19 hygiene for farmers

for distribution to the farmers. Each kit included a reusable mask, soap and a COVID-19 brochure explaining in local language the main symptoms of the virus, the protective measures to adopt, and how to seek help if symptoms appear.

In Indonesia, for example, project staff in our joint project with Louis Dreyfus Commodities (LDC) and the Louis Dreyfus Foundation organised telephone surveys and arranged individual farm visits by LDC’s field technicians living in coffee producing areas. They also prepared hygiene kits

technical assistance.

2020 was a particularly challenging year for smallholder engagement as COVID-19 restrictions challenged the implementation of our programmes. Despite this, our project partners developed innovative approaches to continue support to farmers and we were able to further expand our project work with coffee & tea farmers.

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In China, we are partnering with Kunming-Fumin and the Yunnan Agricultural University to improve Good Agricultural Practices. Together, we have developed the Smart Coffee app and social media programme, through which agronomists connect with farmers throughout COVID-19 lockdowns. In Vietnam, our project with local exporter ACOM developed an application which can be used by farmers to order fertiliser. In Papua New Guinea, our project partner ECOM SMS distributed radios to farmers so they could receive trainings though radio broadcastings. The trainings covered both agricultural topics and COVID-19 educational campaigns. In addition, provincial authorities are now using the channel for emergency awareness.

Multi-stakeholder platforms:

We are also actively involved in the Global Coffee Platform and three of its Collective Action Initiatives: to foster responsible use of agrochemicals in Brazil; to deliver effective coffee-specific extension services to smallholder coffee farming households in Uganda; and to improve the responsible use of agro-inputs in Vietnam’s coffee sector. In addition, we support the Sustainable Coffee Challenge and the European Coffee Federation.

Peet’s currently chairs the Board of World Coffee Research (WCR). WCR uses research in coffee genetics and agronomy to develop better, GMO-free coffee varieties and establish better agronomic approaches. WCR also strives to create market opportunities that empower farmers to navigate the impacts associated with plant diseases and pests, poor soil health, and climate change.

Collaborative partnerships are at the core of our Common Grounds programme. This is underpinned by our active participation in a broad set of multi-stakeholder platforms and initiatives.

JDE and Peet's are active in many multi-stakeholder organisations designed to promote sustainability in the coffee & tea sectors. We are a founding member of the IDH Farm Fit Fund, the world's biggest public-private impact fund for smallholder farmers. We are a member of the International Coffee Organization (ICO) Coffee Public-Private Task Force and committed to its vision and roadmap towards achieving a prosperous, sustainable and inclusive coffee sector.

In tea, our work with the Ethical Tea Partnership (ETP) supports a range of programmes and activities in tea communities across Asia and Africa. ETP's work tackles the grass roots issues in tea communities that impact farmers' and workers' lives; incomes, gender inequality, climate change and social empowerment.

Finally, we are a member of One Planet Business for Biodiversity (OP2B) which is a unique international cross-sectoral, action-oriented business coalition on biodiversity with a specific focus on agriculture. The coalition is determined to drive transformational systemic change and catalyse action to protect and restore cultivated and natural biodiversity within the value chains, engage institutional and financial decision-makers, and develop and promote policy recommendations for the 2021 CBD COP15 framework.

an opportunity for collaboration

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As an organisation we are committed to reducing our environmental footprint while providing quality products that meet the needs and preferences of our consumers and customers. To this end, our Global Environmental Management System pursues continuous sustainability improvements by optimising our use of energy, water and other resources while reducing waste across our manufacturing activities. We also address our environmental footprint along the rest of the value chain by, for instance, the introduction of more sustainable packaging.

This is a relentless process that involves non-stop dialogue with our suppliers and other stakeholders. We can never relax or assume that the job is done. But we can see that the constant innovations and small steps we take are adding up to significant leaps forward.

We produce our coffee & tea across 44 manufacturing facilities globally, a network

that has grown significantly as a result of acquisitions in recent years. Currently, 18 of our manufacturing facilities are certified against ISO 14001, including all our manufacturing facilities within the European Union. Our Peet’s roastery in the U.S. is LEED Gold (Leadership in Energy and Environmental Design) certified.

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Reduction and recycling

Our reduction target creates immediate environmental benefits and allows to make an impact in places where collection and recycling facilities do not exist. It also challenges our packaging engineers and marketeers to find the most efficient ways of delivering our products to our customers and consumers.

Reusability opens up routes to new business models in which packaging is used over and over again. In order to close the loop, we aim to use 35% of recycled content in our packaging where regulation allows.

These are challenging targets, but we are already making positive progress. In 2020, 87% of our primary and secondary packaging was either reusable, recyclable or compostable, while 33% of our packaging came from recycled materials. This is restricted by current regulations which limit the use of recycled content within packaging which is in direct food contact. In addition, we are actively working on programmes to reduce the amount of material we use to support the newly created reduction target.

That’s why we are working hard to reduce the amount of packaging material without compromising on the product quality. Where packaging is absolutely required, we aim to provide consumers with responsibly packaged products and optimised end-of-life solutions.

To focus our efforts, we have defined a new vision for our packaging sustainability: ‘A Planet Free of Packaging Waste’. We have also reviewed our commitments and set ourselves some even more ambitious targets. Thus, by 2025 JDE Peet's will:

•Save 15,000 tonnes of packaging materials used9

•Design 100% of our packaging to be reusable, recyclable or compostable10

•Use 35% recycled content in our packaging11

Compostable coffee pads

In 2020, we successfully rolled out an industrial compostable material across our full portfolio of single-serve coffee soft pads. This amounted to ~5 billion pads for brands such as Senseo, Jacobs and Douwe Egberts.

In Q3/Q4 2021, we plan to launch our first recycle-ready roast and ground and whole beans packaging for, amongst others, the Gevalia brand in the Nordics. In tea, we are on track to convert our Pickwick tea bags to industrial compostable material by the end of 2022.

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A case study

Consumer involvement

Additionally, we have multiple partnerships in place that allow consumers to more easily return their used coffee pods into recycling streams. In November 2019, JDE France teamed up with Nespresso and Nestlé France to launch the “Alliance pour le Recyclage des Capsules en Aluminium” (Alliance for the Recycling of Aluminium Capsule). Most recently, we partnered with Nestlé in the UK to launch Podback which is enabling consumers to easily return our Tassimo T-discs and L’OR coffee capsules through a take-back scheme.

In the U.S., Peet’s has partnered with g2 revolution® to make it easier for consumers to recycle Peet’s Espresso capsules. Consumers may request a recycling bag and pre-paid shipping label from Peet's, fill the bag with used capsules, and send the bag to g2 revolution® for recycling. At the recycling facility, aluminium from the capsule is recycled and coffee grounds are converted to compost. In addition, as of March 2020, all Peet’s K-Cup® pods are made of recyclable polypropylene (#5 plastic), which is widely recyclable across North America.

Delivering against our packaging commitments requires significant technical development and effort across our entire organisation. But the intention of our efforts is clear: to minimise the impact of the packaging we use on our planet. We will continue to monitor and report progress, adjusting the scope to include new acquisitions.

•Compostable12 coffee pads

•100% certified coffee

•Lower energy consuming brewers and increased usage of recycled plastic material by our partner Philips®

•All in all, a coffee system with a low environmental impact from bean to cup13

A cup of pleasure for the consumer, and a kind gesture for the planet!

12 Industrial compostable

13 Based on a 2018 Life Cycle Assessment, comparing the environmental impact of six leading coffee systems commonly sold in the EU market when brewing a long black coffee

Delicious Coffee with Care for the Planet

With Senseo®, each cup matters. The Senseo® brand now offers a more sustainable choice to the consumers with a full relaunch into:

•Relaunched in 2020

•Supported since Q3/2020 with a new communication on TV and online, together with strong visibility in-store

•The new Senseo® Eco-Brewer and the new pads range of Organic coffee both awarded "Product of the Year in France"

•The new Senseo Eco-Brewer® is the Plastics Recycling Awards Europe 2020 winner in the Automotive, Electrical or Electronic Product category

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We can already see the impacts of climate change in weather patterns and more frequent extreme weather events. This affects everyone, from the farmers who supply our raw materials to the consumers who enjoy our products. That's why we are committed to climate action that lessens our environmental impact in our own operations and along our value chain.

In our own operations, direct greenhouse gas (GHG) emissions (Scope 1) and indirect emissions from energy (Scope 2) arise in our manufacturing processes, our warehouses, offices and restaurants, and from the fuel use of our fleet. More than 90% of those Scope 1 and 2 emissions occur within our manufacturing facilities.

Our primary focus is therefore to operate our manufacturing facilities efficiently and reduce fossil fuel use. Wherever possible

we are utilising the spent coffee grounds from our instant coffee manufacturing processes, for example as fuel for on-site energy generation. Some of our manufacturing facilities with their own wastewater treatment facilities, such as those in Banbury, UK and Joure, the Netherlands, capture the methane that is generated in the process and use it as biogas. This reduces our need for natural gas and avoids the associated GHG emissions.

Investing in efficiency

At the same time, we are investing in more efficient technologies and equipment. The Joure facility, for example, has invested in improvements to reduce steam consumption in the extraction process and to increase the quantity of spent grounds that are burned to generate steam for use in the process. The result was a 19% increase in the use of spent grounds in 2020 versus 2019.

Our manufacturing facility in Hemelingen, Germany, aims to invest in a more energy efficient evaporation process in 2021, with expected savings in specific energy consumption of more than 5%. In Johor, Malaysia, planned upgrades of the extraction technology will increase product capability and green bean yield, while maintaining energy and water consumption efficiency levels.

Overall, we made good progress in 2020 and were able to reduce our manufacturing energy intensity to 9.2 GJ per tonne of production. Even so, GHG emissions from our manufacturing processes increased slightly, mostly because of a somewhat lower use of spent coffee grounds as renewable fuel due to spent ground boiler maintenance and optimisation.

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Partnering for progress

We have set ourselves the goal of reaching zero waste-to-landfill status at all our manufacturing facilities globally by 2025. This is part of a determined effort to embed a zero-waste culture across our business.

In 2020, 17 of our manufacturing facilities were landfill-free. We are on track to achieve zero waste-to-landfill at 4 additional manufacturing facilities by the end of 2021. Globally, 3% of our total waste at manufacturing facilities went to landfill.

Across our global manufacturing network, our total volume of waste versus 2019 increased as we included additional manufacturing facilities in our reporting system. We still managed to prevent 89% of our total waste going to disposal in 2020. Almost 90% of waste diverted from disposal went to anaerobic digestion or composting, with the remainder going into recycling streams (including all the hazardous waste diverted from disposal).

This includes, for example, our efforts to choose sustainable packaging materials for our products, and our Common Grounds supplier engagement programme of which climate change forms an important pillar. As part of our landscape programme in the Central Highlands of Vietnam, we have recently partnered with 4C Certification, our supplier Simexco and IDH to measure the carbon footprint of coffee production in Dak Lak province with the aim to better understand the drivers of GHG emissions and opportunities to reduce them.

To bring together such initiatives and our efforts to reduce GHG emissions in our own operations, we are currently updating our climate strategy. This will include a more detailed mapping of our GHG emissions and refined roadmaps to deliver GHG emission reductions across the entire value chain. We will release further information on those efforts later in 2021.

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It is essential that we use water efficiently and ensure that our wastewater is treated adequately to avoid any negative environmental impact. We have set ourselves an internal a target of reducing water withdrawals by 2% per year per tonne of production.

Our tea and the roast and ground, whole beans, and single-serve coffee categories use relatively little water in the manufacturing process. The production of instant coffee, on the other hand, is more water intensive. Accordingly, that's where a focus on the efficient use of this resource is particularly important.

At our manufacturing facility in Hemelingen, Germany, for example, the team observed an increase in the water use ratio per tonne of production for our freeze-dried coffee in recent years and worked hard to reverse this trend. A focused effort to identify water losses and water-saving opportunities led to a variety of projects, including the optimisation of our grey water re-use to minimise freshwater withdrawals. As a result, water withdrawals per tonne of freeze-dried coffee produced in Hemelingen were more than 10% lower in 2020

versus 2019, saving more than 100,000 cubic meters per year. Similar efforts are planned or ongoing across our network of manufacturing facilities.

In 2020, our overall water withdrawals amounted to 7.1 million cubic meters. Compared to the previous year, both our total water withdrawals and our water use ratio have decreased, which reflects our efforts to use water efficiently.

Aerial view of our Hemelingen manufacturing facility

A 10% reduction in water withdrawals

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Our Performance

Rising to the challenge of COVID-19

2020 was a difficult year for so many communities as COVID-19 disrupted lives in new and frightening ways. But wherever there is worry and uncertainty, coffee & tea will always act as a reassuring ritual amidst stressful, hectic, and demanding days. So, at JDE Peet's we decided to stick with what we do best by providing free coffee & tea to those who deserved a break and to those who were unable to access one of life’s small pleasures during the pandemic.

Over the course of 2020, we carried out more than 130 community initiatives in more than 30 countries. In doing so, we donated approximately 30 million cups of coffee & tea to support our long-standing foodbank partners. We also expressed our gratitude to the front-line healthcare workers who have worked tirelessly throughout the year to save lives. In the UK, for example, Kenco treated a million frontline healthcare workers around the country to a free cup of coffee when their workplace coffee shops or canteens were closed.

Helping out across the world

In South Africa, we became involved with a transport programme in the Western Cape that enabled nurses to avoid using public transport. Each morning we gave the nurses a hot cup of Jacobs coffee. In Bulgaria and Greece, we donated to local food banks so that low-income families and people in supply shelters could enjoy a coffee over Christmas. And in Australia, Harris saw a chance to help protect local coffee stores and launched the Café Recovery Project, offering free Harris Café Blend coffee, barista training and marketing support to coffee stores in need.

These are just a few of the community initiatives that we have been involved with across our markets in 2020. It is our responsibility and our pleasure to play a role in this way, and we will always seek ways to help our communities wherever we can.

Engaging our communities

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The purpose of Douwe Egberts is to connect and bring people together. That's why in 2006, we wanted to make a small contribution to bring neighbours closer together and created Burendag (Neighbours’ Day). In 2008, the Oranje Fonds joined in. Since then, Burendag has become an annual event, celebrated by about 1 million participants in around 6,000 neighbourhoods across the Netherlands on the fourth Saturday of September. The idea behind it has never changed: neighbourhoods become nicer, friendlier and safer if neighbours know each other.

In 2020, the COVID-19 pandemic made it more important than ever to connect with each other and be #metelkaar (together). But we also faced a particular challenge: how do you organise Burendag during a

Neighbours’ Day in the Netherlands

pandemic? Ellen van der Linde, Marketing Manager at Douwe Egberts, explains: “In this pandemic it is even more important to know your neighbours better. Together with the Oranje Fonds we looked for suitable activities. Our message was: celebrate safely, celebrate outside in front of your doorstep.”

Activities took place across more than 4,000 communities all over the country. Neighbours worked together to upgrade their neighbourhoods, sometimes did gardening together. Neighbours got to know each other better while maintaining a safe distance. In the evening, 500 neighbourhoods took part in a newly developed Burendag online pub quiz.

As a resident, Ellen has herself been involved in the Burendag for some time: “It introduced me to neighbours with whom I still have a coffee. During lockdown I asked vulnerable neighbours what I could do for them. Without Burendag, I would never have gotten to know these neighbours so well. Burendag helps to create connection in society throughout the Netherlands, over a cup of coffee.”

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A case study

Our Performance

Our Values

Discipline / Simplicity / Accountability / Solidarity / Entrepreneurship

Impact of our values on the year 2020

Around the world, everyone at JDE Peet's is united by the values established and shared by our founders. The year 2020 offered clear evidence of the strength and power of our values. They enabled us to celebrate the production of our 10 billionth aluminium single-serve coffee capsule. They underpinned the expansion of freeze-drying capacity in St. Petersburg, Russia, using only the remote assistance of foreign specialists. They inspired our people to manage a successful IPO in the midst of a global pandemic. We are immensely proud of the way in which our values and our employees made these milestones possible. At JDE Peet’s, our ambitions for our company are matched only by our ambitions for our people.

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Our Performance

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Learning from theory

Learning by doing

Learning from others

the
70:20:10
model

10%

20%

70%

The learning and development strategy for our people is strongly connected to our career development philosophy. People and their line managers discuss and review the development plans in three checkpoints throughout the year: Final Appraisal, Objective Setting and Mid-Year Review. In addition, we encourage our people and people managers to carry out frequent development conversations throughout the year.

Our Learning Management System then offers training and support to employees across four pillars: functional capabilities, core capabilities, team leadership and coffee & tea expertise. The 9,135 JDE Peet's employees with access to our online learning platform have spent an average of 8 hours encompassing e-learnings, videos, sessions and tests (including mandatory trainings). 85% of all ratings received on our more than 700 online courses have been rated 4 or 5 out of a maximum score of 5. In addition, we offer in-person training sessions for all our people, focusing particularly on those groups without access to our learning platform.

At JDE Peet’s, our people are empowered to build their development plan using the leadership and functional capabilities to identify their strengths and areas of improvement. We believe a strong development mix includes:

•70% ‘on the job experience’ (stretch assignments; projects performed next to current position; temporary lateral move to a position in another department; short term assignments; job rotation; working in cross-functional teams)

•20% ‘learning from others’ (feedback; mentoring; coaching; networking; buddy support; job shadowing; seeking advice) and

•10% ‘formal training’ (workshop; training; (e-)courses; webinars; conferences; readings)

On 31 December 2020, we had 19,331 employees. Over the course of 2020, 16.8% of our people were new hires and our turnover rate was 25.2%.17 This rate is driven in particular by high employee turnover and reduction in force at our coffee stores as a result of the COVID-19 pandemic.

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We are committed to providing a safe and healthy work environment for our employees, contractors and visitors. At JDE Peet’s, We Work Safely or We Don’t Work!

hazards via the Fine & Kinney risk assessment method and the HAZOP analysis for processes. Key risks identified and controlled are ammonia safety management, roaster safety management, dust explosion management and

The COVID-19 pandemic introduced new challenges to us in this regard. Many of our employees worked from home for most of the year. Within our manufacturing facilities, we adjusted the way we work to maintain the health and safety of our employees. This included, for example, daily temperature checks for anyone entering the facilities; segmenting and zoning to minimise interaction; the consistent use of masks; and the use of earphones with microphones to enable social distancing in loud surroundings.

We also maintained a strong focus on occupational health and safety across our manufacturing facilities. To enable ongoing Safety, Health & Environment (SHE) audits during the COVID-19

pandemic, we successfully piloted remote SHE audits using digital cameras and microphones. Our Total Recordable Incidents Rate in 2020 was 0.61. Since 2015, we have not had any fatal accidents at any of our manufacturing facilities.

Our management system in this area is governed by the JDE Health and Safety Policy and the ISO 45001 Occupational Health and Safety Management System. We analyse work-related

machinery safety via thorough training programmes and tool kits.

At the end of 2020, 17 of our manufacturing facilities as well as our head office in Amsterdam

were certified against ISO 45001. We are working towards covering additional sites in 2021 and will continue our steadfast commitment to ensuring our employees’ health and safety.

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Financial Performance

2020 performance

In EUR million, unless otherwise stated:

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Divisional review

CPG Europe

In EUR million, unless otherwise stated

CPG LARMEA

In EUR million, unless otherwise stated

Reported sales decreased by -11.3% to EUR 985 million, including a foreign exchange impact of -16.7% mainly driven by the depreciation of the Brazilian real and the Russian ruble. Organic growth was driven by volume/mix growth of 4.5% and 0.9% price. The volume/mix effect

Reported sales increased by 6.3% to EUR 3,475 million, including a foreign exchange impact of -0.7% mainly due to the depreciation of the Norwegian krone and the British pound. Organic growth consisted of 6.7% volume/mix growth and 0.3% price. This positive volume/mix effect was largely driven by the continued

success of our Beans and Single Serve offerings, as well as increased In-Home consumption because of changing consumer behaviour during the COVID-19 lockdowns. Adjusted EBIT increased organically by 15.0% to EUR 1,096 million in FY 20, driven by higher sales and lower expenses.

was driven by continued strong growth in the Single Serve and Premium Instants offerings. Adjusted EBIT increased organically by 21.6% to EUR 219 million in FY 20, mainly driven by higher sales and lower expenses.

Our Performance

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CPG APAC

In EUR million, unless otherwise stated

Reported sales decreased by -3.6% to EUR 659 million, which included a foreign exchange impact of -2.9% mainly related to depreciation of the Thai baht and the Australian dollar. Organic growth consisted of a volume/mix effect of -1.2% and a positive price effect of 0.4%. Australia, New Zealand and China

Peet's

In EUR million, unless otherwise stated

Reported sales decreased by -4.6% to EUR 838 million, which included a foreign exchange impact of -1.7% and a scope effect of -1.4% related to the divestiture of non-core assets. Peet’s CPG business delivered strong double-digit organic sales growth, driven by the shift to In-Home consumption and the popularity of Peet’s premium Beans, Ground and Single Serve offerings. Sales in the coffee stores

experienced strong In-Home growth during the COVID-19 crisis. The Away-from-Home businesses were challenged during the COVID-19 lockdowns.  Adjusted EBIT increased organically by 36.6% to EUR 155 million in FY 20 largely reflecting lower operating expenses and a soft comparable basis.

and Away-from-Home business were significantly impacted by the COVID-19 lockdowns. Organic growth consisted of a volume/mix effect of -5.6% and a price effect of 4.2%.  Adjusted EBIT increased organically by 17.0% to EUR 98 million in FY 20, largely driven by the growth in CPG and the transition of the ready-to-drink coffee business to a licensing partnership with Keurig Dr Pepper.

Out-of-Home

Reported sales decreased by -31.8% to EUR 666 million, including a foreign exchange impact of -0.8% and -1.7% related to scope and other changes. The organic sales decline was driven by volume/mix of -29.1% and a price effect of -0.3%. The Out-of-Home segment was significantly impacted by the COVID-19 pandemic. Many customer channels were (partially) closed during a significant part of the year - including offices, education, BaReCa, travel and tourism. Limited service was maintained where possible

in our coffee stores through alternative business models including, among other things, take-away and pick-up & delivery. In the second half of the year, activity levels were more resilient as customers, consumers and our teams adjusted faster to subsequent lockdown measures.  Adjusted EBIT decreased from EUR 179 million in FY 19 to EUR 4 million in FY 20 due to declining sales. We implemented a range of temporary and structural measures to reduce labour and operating costs.

In EUR million unless otherwise stated

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Our Performance

Underlying profit for the period

In EUR million unless otherwise stated

An overview of the adjusting items can be found under section 'Consolidated Financial Statements, note 2.1'in this Annual Report.

Our Performance

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These materials contain non-IFRS financial measures (Non-IFRS Measures), which are not liquidity or performance measures under IFRS. These Non-IFRS Measures are presented in addition to the figures that are prepared in accordance with IFRS. The Group's use of Non-IFRS Measures may vary significantly from the use of other companies in its industry. The measures used should not be considered as an alternative to profit (loss), revenue or any other performance measure derived in accordance with IFRS or to net cash provided by operating activities as measure of liquidity. More information on the Non-IFRS Measure adjusted EBIT can be found under the section ‘Consolidated Financial Statements, note 2.1’ in this Annual Report. Further information on the definitions of these Non-IFRS Measures can be found under the section ‘Glossary’ in this Annual Report. Although the non-IFRS financial measures presented are not measures of financial performance or liquidity under IFRS, the company uses these measures to monitor the  underlying performance of its business and operations. These measures have not been audited or reviewed by the company’s external auditor.

Non-IFRS Measures

In EUR million, unless otherwise stated:

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Throughout JDE Peet’s we strive every day to live up to and embody the values and principles-based culture at the core of our Jacobs Douwe Egberts (JDE) Code of Conduct and the Peet´s Code of Business Conduct & Ethics. Both codes underline our commitment to ethical behaviour and compliance with laws and regulations in the countries in which we operate. They also make clear the very high standards of corporate behaviour that we require from all our employees, both within JDE Peet’s and when interacting or doing business with external parties. The codes and separate policies include in-depth rules and guidance to employees in key areas like Anti-Bribery, Data Privacy, Competition Law, Conflict of Interest, Sanctions & Export compliance, Insider Trading, Record Management, Accounting and further areas.

A diverse and inclusive work environment

Similarly, we do not tolerate any form of unlawful harassment or bullying. The same is true of disrespectful behaviour in general, including humiliating, insulting, intimidating, or isolating others. All of these are unacceptable. We will investigate such cases, and employees or other stakeholders will never suffer repercussions for reporting any such alleged behaviour.

We place great significance on fostering a diverse, inclusive work environment where all ideas, perspectives, and backgrounds are considered. None of us should face discrimination on the basis of our origin, nationality, ethnic background, sex, sexual orientation, marital status, religion, political affiliation, age, disability, works council membership, or any other trait protected by law.

Employee and supplier standards

We set high standards for the behaviours of our employees. We also apply the same standards to the suppliers we do business with. The principles laid down in the JDE Supplier Code of Conduct, the Peet’s Responsible Sourcing Programme and the Peet's Supply Chain Transparency statement provide the standards of corporate behaviour that we require from our suppliers. We expect

all suppliers from whom we purchase products or services to ensure that their business practices and policies are in line with these principles and standards. We are committed to upholding human rights in our own business practices and those of our suppliers and we intend to disclose more on our approach in our next report.

Our Performance

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Employee awareness and speak up

Courses and training

Anti-Bribery, Anti-Corruption, Trade Sanctions and Anti-Money laundering

As per our global compliance plan and locally deployed plans, we raise awareness of our codes and policies on an ongoing basis. We encourage a culture of speaking up and raising concerns via different reporting channels such as hotlines, dedicated email addresses, a mobile app and

a web form. All of these tools enable our employees as well as our suppliers to report alleged violations of our codes, our policies or any law. Reports made are treated confidentially and are promptly investigated. We do not tolerate any retaliation against anyone who makes a report. 

We deploy policies, processes and trainings on conflict-of-interest situations, anti-bribery and corruption, gifts, entertainment and hospitality, export and sanctions compliance and anti-money laundering. We encourage speaking up and

raising concerns about any such issues to our hotlines/alert lines. As per key risk parameters identified, we are executing third party due diligence measures like sanctions screening, credit checks and anti-bribery questionnaires.

Fair competition

We regularly conduct compliance e-learning courses for employees on topics like competition law, anti-bribery and corruption, data protection and human rights. Such trainings are mandatory for all employees with an email address and access to our Learning Management System (LMS). We offer shared laptops for those employees without such access, e.g., for employees in manufacturing units.

In 2020, we revised our Code of Conduct e-learning to also

include how to use social media properly, how to detect and address conflict of interest situations, on sexual harassment, modern slavery and trafficking, and on speaking up and raising concerns. This e-learning was completed by 91% of our employees with access to the LMS. An e-learning on competition law was completed by 87%, and our e-learning on preventing bribery and corruption (launched in 2019) by 86% of employees with access to the LMS.

We also regularly conduct face-to-face courses for selected target groups. These include, for example, courses on competition law for sales teams, anti-bribery and corruption for procurement teams, and data protection for marketing and human resources teams. In our US business, we have put an emphasis on employment-related matters and deployed a sexual harassment training to 80% of our employees.

We deploy policies, processes and trainings on competition law compliance, and encourage employees to speak up and raise concerns about any such issues via our hotlines/alert lines. As per key competition law risk areas, we have defined competition law controls for example in the area of attending trade association meetings, on customer agreements and on pricing.

No fines have been issued against JDE Peet's for anti-trust law violations.

No fines have been issued against JDE Peet's for anti-bribery or sanction violations.

Our Performance

79

Annual Report 2020  — JDE Peet’s N.V.   

Annual Report 2020  —  JDE Peet’s N.V.   

80

Compliance governance

Risk-based compliance strategy

Risks related to ethics and compliance form an integral part of our ERM process by outlining a defined risk appetite, risk owners and mitigation plans. As a result of the latest ERM process, three

compliance risks were identified as focus areas for 2020: Anti-Bribery and Sanctions compliance, Competition Law and Data Privacy. 

Assurance

We designed global and local compliance controls with the objective of demonstrating the actual deployment of codes and policies with a focus on anti-bribery controls, data privacy and competition law controls. A network of Internal Controls Specialists issue reports to the LCCs on the respective compliance controls maturity for follow up and mitigation actions. 

On a quarterly basis, the local and the regional General Managers and Finance Directors issue a letter of

representation where they confirm compliance of their business units with the codes, applicable policies and the laws. There is an emphasis on compliance with accounting laws and standards, anti-bribery, anti-trust and with data privacy policies and regulations.

As a further layer of assurance, the Internal Audit team designs and deploys a risk-based annual audit plan to review and test compliance controls deployment and compliance maturity.

Our Global Compliance Council (GCC) defines the compliance strategy, policy or controls updates needed, global trainings to be deployed, and overall recurring global compliance plan. These elements are based on the Enterprise Risk Management (ERM) findings and additional data points like Internal Audit reports, compliance control findings, any issues raised through our Speak Up reporting channels, and external and industry trends. The GCC is chaired by the Global Compliance Officer with the CFO, the Global Director Group Control, the Chief Human Resources Officer (CHRO), the General Counsel and the Internal Audit Director as standing members. The GCC issues a quarterly report to the Audit Committee of the Board on key issues of

the last quarter and compliance priorities of the following.

At the local level, all business units have appointed Compliance Officers who chair Local Compliance Councils (LCC) with the General Manager, the HR Director and the Finance Director as standing members. The LCCs are responsible for ensuring the cascade of global compliance policies and controls down the organisation. The LCCs are also responsible for defining and deploying targeted local compliance plans designed to address the specific risks of their business units. They report to the GCC on plan delivery and key issues on a regular basis.

Our Performance

80

Annual Report 2020  —  JDE Peet’s N.V.   

Annual Report 2020  —  JDE Peet’s N.V.   

81

Product quality and food safety

At JDE Peet’s, product safety and product quality are our first priorities. Our mission is to delight our customers and consumers with every cup while delivering safe products of high quality. This applies to our entire portfolio, and to all our systems and services.

Our research and development teams work closely with our marketing, supply chain and procurement teams to identify trends. They then develop new products and modify existing products for all of our product lines, enabling us to quickly and efficiently respond to changing consumer needs. Our multidisciplinary development approach has led to proprietary capsule technology which, together with innovative manufacturing technology, is the basis for our delivery of high-quality, single-serve aluminium coffee capsules across many product variants.

Market-leading freshness

Observing all standards