Starbucks 2.0 (f/k/a Peet’s Coffee)

Do you remember when Starbucks coffee was “gourmet”?  Those days when it was a treat to go to one of their stores for a cup of delicious coffee or a frothy, delightful cappuccino?  Now there is a new kid on the block.  Actually, the kid has been around for a while, but like the plain girl who went through puberty and became beautiful, this store is just now becoming noticeable in its own right as a top coffee-chain.**

After enjoying a tasty double espresso from Joe The Art of Coffee at Grand Central yesterday (a review will be coming soon), I wandered back up to the office and settled in to listen to Peet’s Coffee’s webcast report of the company’s fourth quarter and year end results.  I had expected nothing but doom and gloom from the report, since Starbucks had taken such a hard hit, and consumer spending in general has fallen so dramatically.

What I heard surprised me.  Peet’s earnings per share were up over 30%, the company added over 800 new stores last year, and this was all in a year when the specialty coffee industry as a whole grew only 7%, its lowest growth rate in years.

Then the report got interesting.  Peet’s began describing some of the immediate challenges ahead of the company, the most striking of which was short term stress on Peet’s as certain competitors drop prices and creating values that do not exist in the market (see here).  Although those values may provide an immediate solution to economic woes, Peet’s claims such values tend to be the beginning of the end for former high flyers.  The companies lose their brand value and drop to just another chain.

It seems perhaps a new mega-chain is taking the reins in the gourmet coffee industry.  We have all seen the Starbucks decline coming, but maybe February 2009 is the changing of the guard.  One store is losing revenue and closing stores left and right.  The other is growing rapidly and becoming more profitable than ever.  As happened with Starbucks on its meteoric rise, once again quality is surpassing branding and the torch is being passed.

**As a side note, the purpose of this site is not to attack coffee mega chains in general, or Starbucks in particular, but to study coffee and everything about it, including its economic trends.  In fact, the Manhattan Roaster has a strong history of a love/hate relationship with Starbucks, one that will always keep a special place in my heart for the company.  That will be a story for another post.

3 comments to Starbucks 2.0 (f/k/a Peet’s Coffee)

  • Hey there, Roaster, Netchick sent me to say hi tonight :-)

    Being English, we are not such connossieurs of coffee, but I did like a starbucks americano – but the starbucks in our Mall has closed.


  • mw

    Mmmm, I love a huge cup of coffee, and have several every morning. I’ve long since given up Starbucks and the other big chain coffee shops, simply because I can’t afford them anymore.

    Interesting post – so, is there going to be a major loss of high end coffee vendors, or are they simply going to go into a price war and cut service and quality to survive?

    Here from Netchick!

  • We have the Cafe del Sol in my town but I am a tea lover myself. It even merited a sidebar category on my blog. Netchick’s Meet and Greet is like tea party. Cheers.

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