Starbucks Corp. (SBUX) is reportedly in talks on buyout of the coffee roaster and retailer Peet’s Tea and Coffee Inc. (PEET). Though there have been no reports of any formal announcements regarding any merger or acquisitions from either companies, the analysts and industry sources claiming familiarity with Starbucks anticipate the takeover of the Emeryville, California-based Peet’s specialty coffee retailer and roaster by Starbucks.
Peet’s suffered a setback after Starbucks entered into a deal with Keurig brewer parent Green Mountain Coffee Roasters Inc. (GMCR). As per the deal, Starbucks will distribute its coffee and Tazo tea in Keurig’s K-Cup portion packs. Peet’s had been a potential bidder for the deal and shares of the retailer plunged 15% after the deal was announced.
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.
Again, 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. Peet’s, which boasts of a loyal following of coffee drinkers called ‘Peetniks,’ has announced that it expects to enter the fast-growing single-cup coffee market.
Peet’s and Starbucks have ties that go back to the beginning of both companies. Peet’s founder Alfred Peet was widely reported to be the inspiration for Starbucks. The original founders of Starbucks bought coffee beans from Peet in their first year of business in 1971.
Peet’s shares surged 9.4% to close at $46 on Tuesday amid rumors that it could be a takeover bid of Starbucks.
Currently, we maintain a Neutral rating on the stock. Further, Starbucks holds a Zacks #3 Rank, which translates into a short-term Hold rating.
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
PEETS COFFE&TEA (PEET): Free Stock Analysis Report
STARBUCKS CORP (SBUX): Free Stock Analysis Report
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