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TheStreet Open House

Should Starbucks Buy Peet's Coffee?

Stocks in this article: SBUXPEETGMCRKFTSLENSRGY.PKCL

Peet's has said it would look to make a move into the single-serve coffee market, a growth area Starbucks also plans to penetrate, evidenced by its recently announced partnership with Green Mountain.

Peet's would be an attractive target for Starbucks, some analysts say, given its mature distribution network and premium pricing. The pair already shares some history, too; Peet's was Starbucks' original coffee bean supplier in 1971, according to the Financial Times.

"If Starbucks buys the coffee roaster, it can use Peet's relationships with major retailers, who will allow a "triad of premium brands" on store shelves, with Peet's offering super-premium, Starbucks as premium and Starbucks' secondary brand Seattle's Best Coffee positioned as "fighting" premium," Zacks noted.


On March 23 at Starbucks' annual shareholder meeting in Seattle, CEO Howard Schultz told investors he wants sales of the companies coffee and other products at grocery stores and other retail outlets to rival its traditional coffee shop business, meaning the operating segment would have to grow more than tenfold from its 2010 revenue of $707.4 million.

Peet's super-premium brand offering on store shelves could help Starbucks progress toward that ambitious goal.

"Peet's Godiva-flavored coffees would also give Starbucks leverage if it enters the single-cup brewer market, which many perceive as a huge area of growth in the coffee industry," the firm added.

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