Caribou Coffee crunch
By MarketWatch
Dec 17, 2012 15:18:01 (ET)
SAN FRANCISCO (MarketWatch) - Let's face it. Despite heartfelt dedication to customers, community and planet Earth, coffee houses have become a really big business under heavy pressure to compete through consolidation.
On Monday Joh. A. Benckiser Group, a German holding company controlled by the Reimann clan, announced it is buying Caribou Coffee Co. for $340 million, or $16 a share. That's a whopping 30% premium to Caribou's closing price Friday.
This is the second time JAB has taken a publicly traded coffee house chain back into private hands. The first was five months ago, when it bought Peet's Coffee & Tea for $1 billion. Read about just how hot the U.S. coffee market is.
While Peet's, a pioneer in the premium coffee house business, has legendary status among aficionados, it lacked outlets. Caribou Coffee takes care of that. The Minneapolis-based chain has 610 stores in 22 states and gives JAB a much bigger distribution footprint.
Caribou said JAB intends to operate it as an independent brand. Maybe. But it's a safe bet JAB will used the combined clout of Peet's and Caribou to swing better deals when buying beans in the commodities market.
While JAB has quickly built a major presence in the sector, it is still dwarfed by Starbucks Corp. Starbucks has over 20,000 stores in 61 countries, 13,000 of them here in the United States. Given its vast, multi-billion-dollar global empire, it's no wonder others want a piece of it.
Unfortunately for those looking to invest in the next takeover candidate, there aren't a lot of publicly-traded coffee houses. Tim Hortons Inc. is the only high-profile candidate out there, but the Canadian company is more of a casual restaurant chain along the lines of Dunkin' Donuts rather than a "pure play" coffee house.
Given the modest price move by Tim Hortons shares Monday, it doesn't look like anyone thinks it might be in play. Dunkin' shares actually did better, up 3%.
There are several big, privately owned coffee houses, however, whose owners could reap big paydays from further consolidation of the industry. Three names that come to mind: The Coffee Beanery and Biggby Coffee, both based in Michigan, and Oregon-based Dutch Bros. Coffee, which claims to be the biggest drive-through coffee chain in the country.
It's precisely this lack of publicly traded entry points to the coffee business that keeps upstarts such as Green Mountain Coffee Roasters Inc. on investors' radars. A volatile stock? Absolutely. But for lack of options, it is one of the few openings into a huge, robust industry that often seems shut to all but the biggest players.
-- Jim Jelter
