Starbucks Case
Essay Preview: Starbucks Case
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strong,” Mr. ODea said, “our Internet, mail order and grocery businesses go up within a five-mile radius of the outlet. Were agnostic about where people buy our product. Retailing is a means to an end, not the end in itself.”
Starbucks takes a different approach. Its retail stores were responsible for 85 percent of the companys revenue in the most recent six-month period. Retail operations are “the primary driver of the companys revenue growth,” its latest financial report notes.
Compared with Starbuckss 6,605 stores in the United States and an additional 2,656 abroad, the Peets operation is about as noticeable as a fly on an elephant. Peets operates just 99 outlets, up from 75 at the beginning of last year. It expects to open another 20 this year.
The company plays on its 60s image, highlighting its Berkeley coffee house roots and filling 2,000 higher-margin mail orders a day to its nationwide roster of committed “Peetniks” buyers.
“The key is Peets can complement Starbucks,” said Matthew Difrisco, who has advised the company for Thomas Weisel Partners, a San Francisco venture capital firm that helped Peets raise money after it went public. “The Peets customer is older, more mature and better educated.”
Peets continues to thrive by attracting consumers like Jenna Phillips, a Berkeley clothing designer who says she is “a total Peets devotee.”
The coffee is “stronger than Starbuckss,” she said, “and its not part of an evil empire.”
which also sells over the Internet and by mail order, has significantly stepped up its expansion plans. It is opening more retail stores in the West and introducing its brand to a number of specialty and high-end grocery stores across the country, hoping to entice a growing group of coffee iconoclasts.
“Peets grew out of a passion for specialty coffee,” said Kerri Goodman-Small, publisher of Hospitality News, a food service industry journal. “Starbucks focuses on consistency and a variety of beverages.”
For all their differences in size and style, Peets and Starbucks are linked by their past: the current director of Peets, Gerald Baldwin, helped found Starbucks before selling to Howard Schultz, who built it into the ubiquitous brand of today.
Operating in Starbuckss very large shadow, Peets is one of several small coffee retailers that are expanding from strong regional bases. These include Caribou Coffee from Minneapolis; Diedrich Coffee, based in Irvine, Calif.; Its a Grind from Long Beach, Calif.; and Tullys Coffee, with headquarters in Seattle.
The passion for Peets extends to Ruth Reichl,