Starbucks in Talks to Buy Peet's

Categories: Business, Coffee

peetsstarbucks.jpg
Because Starbucks coffee isn't finished running every decent coffee company into the ground, the caffeinated behemoth is in talks to buy Northern California-based Peet's. The two have been quietly dating for months, but the relationship recently grew serious with the two companies now considering marriage. Peet's stock closed up 9.4% at $46 on Tuesday, upon news of the potential merger.

Good for business, bad for coffee drinkers. We expect to see more coffees that are wildly over-roasted to mask low quality, under-ripened beans. All hail the (further) slide toward mediocrity.

Valued at $26 billion and with over 10,000 stores in the United States, Starbuck's is the alpha in this relationship. Peet's, in comparison, has 192 retail stores and is valued at $589 million.

Analyst Steve West tells Reuters the big growth area is the grocery business:

"What can Starbucks do with Peet's business in the next 2 to 3 years? They can probably double or triple it," West added.

Peet's is itching to get into the single-cup coffee market, according to Reuters. In early 2010, the company lost a takeover battle with Green Mountain for Diedrich Coffee, which makes coffee for Green Mountain's Keurig machines.

The news was first reported by dealReporter, a paid, online publication that delivers news about mergers and acquisitions to clients in the equity and fixed-income markets.

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17 comments
Tgressitt
Tgressitt

After having worked for Starbucks a short while back and being hired by Peet's somewhat recently, I can say that there is a HUGE difference in the quality of just about everything. And Peet's beats Starbucks by a landslide. Even when I was working for Starbucks I would donate my free weekly pound of coffee and instead spend money on Peet's beans. Starbucks drink quality standards have been in decline; Espresso shots used to need to be in your cup and mixed with milk within 10 seconds to preserve the flavor of the espresso, many of my former coworkers have informed me the standard has now been raised to 30 seconds. Anyone familiar with Espresso machines knows that this is unacceptable and will make for a seriously crappy latte. Many other standards in Starbucks drink making have been slipping. Peet's also hand roasts their beans in small batches to order for stores on a weekly basis. Starbucks roasts huge quantities, sometimes months in advance. You're guaranteed to get the freshest coffee from Peet's short of roasting it yourself. Peet's also specializes in loose leaf teas, while the average Starbucks barista doesn't even know what loose leaf tea is. I also attended an intimate 3 hour long mandatory training class on how Peet's teas are grown, selected, harvested, blended, etc. with a few (meaning 4) of my fellow employees. When Starbucks first hires you, you go over that stuff, but they never encourage you to keep learning and trying more things. They teach you to sell the next promo drink. And while Peet's does that to an extent, it's much more about making it a personalized customer experience. We want to give you what you want, and if you're not sure what that is, us peetniks are trained to be able to help you figure it out.

All that being said, I really, REALLY hope that Starbucks doesn't buy out Peet's, and that Peet's continues to maintain it's awesome quality.

Thomas
Thomas

Fortunately for Angelenos, there are seventy gajillion places to get a great cup of coffee that are not part of any major chain whatsoever. In my neighborhood (downtown Burbank), it's the entirely nondescript San Marco Roasting House. I go there every day except Sunday (when it's closed). Depending on how far afield I've gone, and how much I'm willing to spend, I'm also happy to drop into Intelligentsia, or La Mill, or the Gumbo Pot, or Urth Caffe. Unless you live in stucco suburbia, getting one's hackles up over a Starbuck/Peet's merger is like worrying about who bought whose boat at auction yesterday in the French Riviera.

Steve
Steve

This absurd post should at least consider how each company treats its employees, including wages and benefits. Treating the two companies as Manichean rivals is oversimplified and unintelligent.

Bluebee78
Bluebee78

Starbucks is fluffy coffee... and Peet's is for REAL coffee drinkers... I stopped going to Starbucks when they started serving coffee grounds in their coffee...

Liz
Liz

Peet's generally buys some decent lots of green coffee. Roasted super dark but with skill. And it's fresh, as long as you buy it in the cafe, not the supermarket. If this goes through, hopefully Starbucks will let Peet's continue to do its own thing.

BONQO
BONQO

Curious to see how this "relationship" works out in the long-term....

The Late Ixo
The Late Ixo

Get your head out of your ass, everyone. We'd all still be drinking Folger's if it weren't for Starbucks. Focus on encouraging them to become Peet's, rather than the other way around. Given the long relationship between the two companies, it has to be possible. Peet's charges only slightly more, and the quality of their employees, on average, is no higher. So it's possible. To the person who thinks "it's like hearing that McDonald's is buying the French Laundry": no, it's like hearing that In-N-Out is buying Fatburger, which I'd welcome in the hope that the latter would favorably influence the former.

Nick
Nick

While you make some good points and I agree with much of this logic, I just don't see how by buying Peet's, Starbucks will become more like Peet's. Starbucks certainly didn't change much after converting Diedrich stores.

Conrad
Conrad

Starbucks has made some interesting steps toward becoming more quality oriented not the least with opening their concept stores in Seattle and buying the company that created the clover machine. However, they have also slid backwards in favor of profits by creating their "via" instant coffee. Perhaps we will see a split in the giant in two different directions, perhaps not. But either way, Starbucks will continue to branch out and most likely become the stepping stool for the rest of the coffee industry to improve on like they once did.

sku
sku

Ehh. Sadly, Peet's has been in decline for years. Typical overexpansion. This is the logical next step.

Nick
Nick

In addition to seemingly higher quality beans, Peet's is great because their drip coffee is always fresh (they dump out the coffee every 30 mins or so) and their baristas are usually much more knowledgeable and reliable than employees at Starbucks.

Joe
Joe

Regarding the comment: "We expect to see more coffees that are wildly over-roasted to mask low quality, under-ripened beans"... I believe Peet's touts that they roast darker than Starbucks. It looks, smells and tastes like they do, and I don't think either company would state that one or the other purchases anything but high-quality arabica beans - in fact they both claim to pay higher than average prices for those beans, as they need high-quality beans to stand up to the darker-than-most roast philosophy.

Earniepsimms
Earniepsimms

There is such a HUGE difference in quality of drip coffees in the two places. There just is no comparison. Peets is all about flavor, and Starbucks is about heat and bitterness. Rhetoric is ultimately useless in this issue, say what they may. I truly hope your taste buds can tell the difference.

ssdd
ssdd

Howard Schulz, the preacher man, is back at Starbucks. He's the one who took it over from the Jerry's after they copied the idea from Alfred Peet. Starbucks will poison Peet's quality. It's like hearing that McDonald's is buying the French Laundry.

Sandy Lauren
Sandy Lauren

I have boycotted Starbucks for years in favor of Peets. This an insult and an abomination

Coachfreeman1
Coachfreeman1

I do this too. If Peet's joins up with the evil empire I might just give up coffee all together. Maybe I'll start smoking;(

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