Pete’s Coffee & Tea Analysis
Professor Shah
ENTP 4311.001
23 April 2013
J.P. Barbosa, Stephanie Bergmann, and Octavio Samano
Barbosa, Bergmann, & Samano 2
Peet’s Coffee & Tea
Background of the Company
 Peet's Coffee & Tea, Inc. is the premier specialty coffee and tea company in the United States.
The company was founded in 1966 in Berkeley, California by Alfred Peet. i
 Headquartered in Emeryville, California i
 Peet’s Coffee & Tea offers superior quality coffees and teas in multiple forms, by sourcing
the best quality coffee beans and tea leaves in the world, adhering to strict high-quality and
taste standards, and controlling product quality through its unique direct store delivery selling
and merchandising system. i
 The stores also offer freshly brewed coffee, biscotti, and other pastries, along with mugs and
brewing equipment. In addition to its retail operation, Peet's sells coffee through retail
grocery chains such as Safeway and Whole Foods, and through its own online mail order
operation. The company also supplies coffee to foodservice operators. ii
State of the Companyiii
 Approximately 3,750 employees
 On October 29, 2012, Peet's Coffee & Tea, Inc. and Joh. A. Benckiser ("JAB") announced
the successful completion of the acquisition of Peet's by JAB for $73.50 per share in cash
Business Units:
 Retail Stores
1. $214 million in sales for 2011
2. Strategic focus: margin expansion and brand building
o As of January 1, 2012 Peet’s operated 196 retail stores in six states through which
they sell whole bean coffee, beverages and pastries, tea, and other related items.
o The stores are designed to facilitate the sale of fresh whole bean coffee and to
encourage customer trial of our coffee through coffee beverages.
o At the bean counter, employees assist customers with questions on coffee origin and
characteristics as well as home brewing. Upon order, beans are scooped and ground
to the customer’s specific requirements.
o At the beverage counter, they sell freshly-brewed coffees and coffee-based beverages,
which is believed to promote customer familiarity, sampling, and sales of whole-bean
coffees.
o To ensure that freshness standards are consistently met, it is company policy not to
serve brewed coffee that is more than 30 minutes old and every espresso-based drink
is made to order using freshly pulled shots of espresso and freshly steamed milk.
o Retail stores comprised 57.6%, 61.4% and 64.6% of net revenue for the fiscal years
2011, 2010 and 2009, respectively.
 Specialty (consumer packaged coffee and tea)
1. $158 million in sales for 2011
2. Strategic focus: growth
o Grocery  They sell their products through a network of grocery stores, mass
merchandisers and club stores.
o To support these sales, they have developed a direct store delivery (‘‘DSD’’)
selling and merchandising system. Peet’s DSD route sales representatives
deliver directly to their stores anywhere between one to four times per week,
Barbosa, Bergmann, & Samano 3
properly shelve the product, rotate to ensure freshness, sell and erect free standing displays and forge store-level selling relationships. In addition, they
ship directly to certain customers depending on the customer and product
offering. They currently have 79 company-operated DSD route sales
representatives and approximately 220 independent distributors to support
grocery accounts.
o In addition to the Peet’s brand, in 2009, they began selling Godiva brand
coffees to establish a competitive position in the flavored coffee segment in
grocery stores, mass merchandisers and drug stores.
o Grocery comprised 26.6%, 22.9% and 20.1% of net revenue for the fiscal
years 2011, 2010 and 2009, respectively.
o Home Delivery  The home delivery channel offers customers the ability to have
fresh-roasted coffee and hand-packed tea shipped directly from Peet’s roastery to
their doors and a wider selection of coffees and teas than are available in Peet’s retail
stores or at their grocery store partners.
o For the most loyal home delivery customers, they provide an automatic
recurring delivery coffee and tea service. They offer home delivery services
on their website, peets.com, and through their team of customer service
representatives who assist customers in placing orders, as well as choosing
gifts.
o As coffee and tea experts, the customer service team also provides in-depth
coffee and tea information to customers, guiding them through their coffee
and tea explorations.
o Home delivery comprised 4.7%, 5.1% and 5.5% of net revenue for the fiscal
years 2011, 2010 and 2009, respectively.
o Food Service and Office  they have a staff of sales and account managers who
make sales calls to potential accounts and conduct quality audits at existing accounts.
o Additionally, Peet’s has established relationships with foodservice and office
distributors to expand their account base in select markets and channels. These
distributors have their own sales and account management resources.
o Peet’s has two models for servicing their foodservice accounts and
distributing their products: ‘‘We Proudly Brew’’ (‘‘WPB’’) accounts and
licensing accounts. WPB accounts are foodservice accounts where Peet’s
supplies the product, and in some cases the equipment to brew and resell
Peet’s products. Licensing accounts involve the creation of a full Peet’s
beverage store within another location such as an airport, grocery store or
college campus. The licensee is responsible for the build-out and management
of the unit, and Peet’s provide training and operations oversight.
o The office coffee channel is a distributor-based business where Peet’s sell to
specialty distributors who in turn sell their products for brewing in individual
offices.
o Foodservice and office comprised 11.1%, 10.6% and 9.8% of net revenue for
the fiscal years 2011, 2010 and 2009, respectively.
Current Challenges & Solutions/Alternativesiii
 Emergence of the single cup brew
Barbosa, Bergmann, & Samano 4

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o Solution: In order to stay competitive it is best to have a single cup brew in the form
of an instant packet or “K-cup” in order to keep from losing market share
Peet’s roasting methods are not proprietary, competitors able to duplicate them
o Solution: With the company going private in 2012, patents should be made to protect
the value of Peet’s Coffee
Perceived health risks of coffee and certain teas and the caffeine they have
o Alternative: Make decaffeinated versions of all the popular roasts, as well as offer
more cocoa based drinks that do no contain caffeine
National, regional, and economical conditions
o Solution: Revenues rely on customer confidence in spending, so offer more options
that are less expensive
Competitive Positioningiii
 The specialty coffee category generates most of its sales from coffeehouses that currently
number over 22,000 in the United States.
 In addition, coffee is sold by coffee roasters like Peet’s to grocery stores, foodservice
operators, offices, and direct to consumers through websites and mail order and other places
where coffee is consumed or purchased for home consumption.
 Starbucks is the primary competition in the coffeehouse business and as well in selling to
coffee roasters.
 Other competition comes from Green Mountain Coffee Roasters (‘‘GMCR’’), Illy Caffé,
Seattle’s Best (Starbucks), and Dunkin’ Donuts, and even from indirect competition Maxwell
House and Folgers
 New competition has risen in the past few years from the Keurig K-cup single brewing
system
 The “mainstreaming” of specialty coffee (more people upgrading to specialty priced coffee)
has made competition even tighter in the industry
Productsiii
 Coffee beans
o The company purchases only high-quality Arabica coffee beans, which are
considered superior to beans traded in the commodity market. The Arabica beans
purchased by Peet’s tend to trade on a negotiated basis at a substantial premium
above commodity coffee prices, depending upon the supply and demand at the time
of purchase.
o Peet’s procure coffee from 23 countries, with a large percentage of coffee coming
from Central and South America, and over 30 different exporters, brokers and
growers.
 Coffee types and blends
o Major Dickason’s Blend, is very well regarded by customers for its uniqueness,
consistency and special flavor characteristics.
o Peet’s sell approximately 28 types of coffee as regular menu items, including
approximately 16 blends and 12 single origin coffees such as Colombia, Guatemala
San Sebastian, Sumatra and Kenya.
o They offer a line of high-end reserve coffees including JR Reserve Blend and Kona,
and they also have featured seasonal reserve coffees such as Jamaica Blue Mountain.
Barbosa, Bergmann, & Samano 5

(On average, the company offers four to six such coffees every year, including the
Anniversary Blend and Holiday Blend).
o In the grocery channel, Peet’s also offer a variety of Godiva brand coffees, including
several year-round and seasonal flavored coffees, such as Chocolate Truffle and
Pumpkin Spice, in addition to a Breakfast Blend.
Tea and food and merchandise
o Peet’s offers a line of hand-selected whole leaf and bagged tea. They purchase tea
directly from importers and brokers and store and pack the tea at their facility in
Alameda, California.
o Peet’s offers a limited line of specialty food items, such as high-quality baked goods,
chocolates, and other snacks.
o Merchandise consists of brewing equipment for coffee and tea, paper filters, and
brewing accessories and branded and non-branded cups, saucers, travel mugs and
serveware.
i
http://www.peets.com
ii
http://biz.yahoo.com/
Barbosa, Bergmann, & Samano 6
iii
O'Dea, Patrick J. Peet's Coffee & Tea, Inc. Rep. N.p., n.d. Web. 8 Apr. 2013.
<http://files.shareholder.com/downloads/PEET/1917748931x0x557031/24f88079-5cee-40acbcba-4397f29118d7/2011_Peets_Annual_Report_web_ready.pdf>.