Peet's Coffee Poised for Growth as Starbucks Contracts
Premium coffee seller Peet's Coffee & Tea Inc., which is experiencing successful grocery store penetration of its retail packaged coffee, is in a position to grow as its larger rival Starbucks Corp. contracts after years of rapid store development, according to a Reuter’s report.
The operator of 180 company-operated cafes earns 72 percent of its operating profit from bagged coffee sales through grocery stores, home delivery and its food service and office businesses, according to the report.
"We're a coffee company that happens to have retail stores, not a retailer that has coffee," CEO Patrick O'Dea told Reuters during a recent interview.
Peet's plans to open 25 stores this year and expand its East Coast supermarket distribution of its retail bagged coffee.
The San Francisco-based company’s decision to focus on grocery distribution and sales has helped insulate Peet’s from consumer cut backs on luxuries, such as $4 specialty coffee drinks, during tough economic times.
In the most recent quarter, Peet’s operating income as up 63 percent and sale were up 17 percent. Meanwhile Starbucks, which is closing about 600 poor-performing U.S. coffeehouses, reported revenue was up 12 percent in its latest quarter, but operating income was down 26 percent.
While grocery sales remain robust, O'Dea told Reuters Peet's is seeing softness at its retail coffee shops, but same-store sales are still positive. "It's a pretty difficult environment," O'Dea said.
For more on Peet’s and it grocery store distribution and sales see, “Peet's Coffee & Tea Posts Big Sales Jump,” posted May 5.