Peet’s CEO Speaks
I’ve always admired Peet’s Coffee — even when I was a die-hard Starbucks marketer. On market trips to California I would always bring back a pound (or two) of Peet’s whole bean coffee. And every Christmas I would order Peet’s Holiday Blend to compare with Starbucks Christmas Blend.
Peet’s has managed to maintain its coffee authenticity all the while growing at methodical pace. Peet’s authenticity stems from Alfred Peet who is regarded as the “grandfather of specialty coffee” in the US.
Alfred Peet’s story is remarkable. His father was a coffee roaster in the Dutch village of Alkmaar. In 1938, when Alfred was 18 years-old, he began helping his father roast and blend coffee beans. During WWII, Alfred was forced into a German labor camp. By 1948, Alfred left his domineering father and spent time in Java and Sumatra. While in the Indonesian Islands, he gained an appreciation for exotic, full-bodied Arabica coffee beans. In 1955, Alfred found himself working for a coffee importer in San Francisco. Eventually, he became unsatisfied with the poor quality of coffee the importer was roasting and selling.
Finding himself unemployed in 1965, Alfred Peet decided to open up his own coffee shop roasting and selling high-quality coffee. Peet’s Coffee & Tea opened for business on April of 1966 in Berkley, CA. (It was a few years later when three coffee-loving friends opened up a coffee shop in Seattle, WA selling Peet’s coffee. That coffee shop was then known as Starbucks Coffee Tea & Spice.) [source material from UNCOMMON GROUNDS, Mark Pendergrast]
So the authenticity Peet’s Coffee & Tea has is real … and today, the company is publicly-traded with 150 locations (mainly in California).
Patrick O’Dea has been the CEO of Peet’s since 2002 and in an informative interview with Fortune magazine, O'Dea shared some perspective on how Peet’s competes in coffee world dominated by Starbucks.
FORTUNE: How do your stores compare with Starbucks?
O’DEA: “We're fundamentally different from other coffee shops. Our average sales for stores open at least three years are $1.3 million, which compares to about $1 million for a Starbucks. Of that, $500,000 comes from sales of whole bean coffee and tea. When you walk into our stores, you will find a bean counter with 32 bins of fresh beans, and we scoop to order. You can also order a beverage, which accounts for the other $800,000. We sell a lot more straight-up coffee than Starbucks does. We do have a blended cold drink line called Freddos, but we sell very few beverages in our stores that don't contain coffee. Our prices are about 10 percent higher than Starbucks.”
FORTUNE: What do you make of Starbucks' [chairman] Howard Schultz's recent memo warning against the "commoditization" of the Starbucks brand?
O’DEA: “I think whenever you get that large, there is always pressure to continue to drive comp-store sales. But you have to be careful about how you go about doing that. We are indifferent to where you buy your coffee - in the grocery store, via home delivery or in our stores. As a result, we do not report comp-store sales because that would cause us to do unnatural things. Even though 68 percent of our business is from retail stores, we don't view ourselves as a retailer.”
For more … read the Fortune Magazine interview.
For much more … read the dissection Paul Williams and I did on the Howard Schultz memo noted above.
And for much, much more … read the WHAT MUST STARBUCKS DO? manifesto.