(Starbucks' (SBUX) rumored takeover of Peet's Coffee (PEET) report updated with CEO Howard Schultz' ambitious goals to grow the company's grocery business more than tenfold.)
SEATTLE ( TheStreet) -- Peet's Coffee & Tea ( PEET) shares gave up some of their recent gains Tuesday as rumors continued to circulate that Starbucks ( SBUX) could be looking to take it over. The specialty coffee roaster and retailer saw its share plunge earlier in March after news broke that Starbucks and Green Mountain Coffee Roasters ( GMCR) announced a long-anticipated partnership, leaving Peet's out of the lucrative deal.
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.
Sources told Financial Times that Peet's would be a better target for companies like Kraft Foods ( KFT) or Nestle SA's ( NSRGY). Janney Capital Markets analyst Mitchell Pinheiro said a Peet's buyout by Starbucks would dilute the buyer's marketing bandwidth. "Why would you need another super-premium coffee brand, when I'd argue Starbucks is the number one super-premium coffee brand in the country, if not the world?" he asked. He added that devoted Peet's customers, known as "Peetnicks," are typically anti-Starbucks and could become disillusioned with the brand if Starbucks were to take it over, choosing instead to spend their coffee dollars elsewhere.
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