Peet s Coffee Tea Tara Alcantara-Beers

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Peet's Coffee & Tea Tara Alcantara-Beers Karol Caballero Yizhe Liu Daniel Brockman UC. Berkeley Extension Strategic Marketing Ming Yang May 24 th 2010

Peet's Mission & Vision MISSION VISION • "To enable and inspire customers to enjoy the daily pleasure of Peet's Coffees & Teas by providing a distinctive, superior product, superior coffee and tea knowledge and superior service to every customer, every day. ” • “To be the gold standard specialty coffee and tea brand available to the world, with one of the most dedicated and loyal customer followings of any brand. ” Strategic Marketing - Spring 2010 1

General Description of Peet's Coffee & Tea • Peet’s is a specialty roaster of whole bean coffee & teas based in Emeryville, CA • Peet's founded by Alfred Peet in 1966 in Berkeley, California • Alfred focused on the quality of the coffee • Original store located at corner of Walnut & Vine near U. C. Berkeley • In 1979 Alfred sold Peet's but stayed on as coffee buyer • Roasting plant is located in Alameda Peet's Website/Wikipedia Strategic Marketing - Spring 2010 2

ALFRED PEET-FOUNDER 1920 -2007 Strategic Marketing - Spring 2010 3

Peet's Company Info US Statistics: • Public Company • Retail Stores: 192 in 6 states • Employees: 3750 • Sales: 311 million • Competitors: Starbucks, Tully's, Coffee Bean & Tea Leaf, local coffee shops in the retail stores channel, and Kraft and J. M. Smucker in the grocery channel Yahoo Finance Strategic Marketing - Spring 2010 4

2009 Sales Breakdown Retail Sales (stores only) : • Retail stores remained stable 7% comprising 65% of net revenue • Retail store sales were 65% of net revenue • Specialty (consists of grocery, foodservice & office) • Grocery Sales 22% comprising 20% of net revenue • Sales of specialty coffee was 84% of net revenue Peet's Coffee & Tea, nnual Report on Form 10 -K for 2009 A • Strategic Marketing - Spring 2010 5

Quarterly Financials Revenues, Thirteen Weeks Ended (dollars in thousands) APRIL 4, 2010 March 29, 2009 Increase/(Decrease) Grocery $ 18, 643 $ 13, 387 $5, 256 39. 3% Foodservice & office 8, 480 6, 706 1, 774 26. 5 % Home delivery 4, 002 4, 029 (27) -0. 7% Total specialty $ 31, 125 $ 24, 122 $ 7, 003 29. 0 % www. peets. com Form 10 -Q Quarterly Report Filed May 14, 2010 Strategic Marketing - Spring 2010 6

Grocery to be Peet's Strength • Peet's is focusing on Grocery Growth as Starbucks Shuts Cafes • Revenues growth year over year in the 1 st quarter of 2010 v 4% in retail stores v 39% in grocery • Operating margins in the 1 st quarter of 2010 v 9% in retail stores v 26% in grocery, office and home delivery • Peet's even has a separate Grocery Website http: //www. peetscoffee. com/ Strategic Marketing - Spring 2010 7

Target Customers who care about quality, variety, convenience: • Quality: customer values most • Like strong, dark coffee • Annual household income: +125, 000 • Peet's drinker buys coffee from specialty (Peets, Starbucks) Peetniks: • Strong loyalty customer • Morning coffee every day • Members of the Peetniks loyalty program • Passionate about Peet's products • Exclusive benefits to active recurring orders http: //www. peets. com/peetniks/about. asp? rdir=1& Strategic Marketing - Spring 2010 8

Products Highly selective sourcing: • Carefully chosen beans, taste coffees again and again • Coffee and Tea Expertise • Paying the highest prices for quality Delivered fresh: • Use the freshest beans within 24 hours of being roasted • Brewed fresh every 30 minutes or less • Never re-steam milk Artisan roasting style: • Roast in small batches • Draw out the depth of flavor Peet's Coffee & Tea Inc, Form 10 -k annual report 20100319 Strategic Marketing - Spring 2010 9

Key Success Factors • Expertise in Coffee and Tea • Sophisticated information systems infrastructure v Business Intelligence v ERP, POS and CS • Freshness Strategic Marketing - Spring 2010 10

Sustainable Competitive Advantage • DSD - Direct Store Delivery system v From Roaster to Shelf in 24 hours • Artisan roasting style v • Small batches Highly selective sourcing v Long-term relationships with exporters, brokers & growers Strategic Marketing - Spring 2010 11

Taste Test Strategic Marketing - Spring 2010 12

Promotional Efforts • In-Store Promotions • Partnerships with Foodservice Operators • Online Presence • Community Service Strategic Marketing - Spring 2010 13

Prices of selected medium (grande) drinks Starbucks Peet's Regular coffee $ 1. 85 Espresso 1. 95 2. 20 Caffe Latte 3. 35 Retail stores in Petaluma, California, May 2010, Daniel Brockman Strategic Marketing - Spring 2010 14

SWOT Analysis • Effective distribution network • High quality ingredients • Community involvement • High quality collaboration with sources • Weak brand recognition • Limited food selection • Highly Competitive Market S T W O • US Economic Slowdown • New Product Launch • Godiva flavored Coffee • Geographic expansion • Partnerships • Airline • Groceries Strategic Marketing - Spring 2010 • Candy 15

Critical considerations • Grow the company • Excellent coffee experience • Responsibility • Profitability Strategic Marketing - Spring 2010 16

Alternative 1: Airborne The Concept: • • • Pros: Cons: Partner with airline. Learn to serve excellent fresh coffee at 8, 000 feet. Trials on flights from Oakland Airport, 1 mile from roastery. • Creates markets distant from California in travelers' homes • Can we train airline crews to serve excellent coffee? Recommendation: • Conduct a trial and assess. Strategic Marketing - Spring 2010 17

Alternative 2: Invest in Grocery The Concept: • • Expand Grocery eastward. Driver: Customer migration to specialty coffees. o Growing customer awareness of Peet's. Pros: • • Peet's has financial assets to invest Rapid growth: 39% in 10 Q 1 vs. 09 Q 1 Profitable: 26% operating margin Better than expanding retail stores Cons: • • What are the limits to Grocery channel growth? Large competitors Recommendation: • Invest in Grocery star Strategic Marketing - Spring 2010 18

Alternative 3: Instant and Canned The Concept: • Introduce canned and instant lines of coffee. Pros: • Reach out to new customer segments. • Synergic use for store delivery system. Cons: • Canned and instant coffee isn't fresh. • Compromise existing standard of quality. Recommendation: • Let Starbucks do it. Strategic Marketing - Spring 2010 19

Summary of Recommendations • Try airborne Peet's coffee. • Don't produce Instant or Canned coffees. • Expand distribution through Grocery channel. Strategic Marketing - Spring 2010 20

Questions? 21

Appendix 1: 22

Appendix 2: Promotional Efforts Community Service: • Partnerships with International Non-Profit Organizations v Grounds for Health v Coffee Kids v Techno. Serve v Utz and Rainforest Alliance Certification • Global Initiatives v KIMSSA v Las Hermanas v The Butterfly School v International and American Red Cross • Local Sponsorships v Local School fundraisers v Back to the Roots Ventures v Athletic fundraisers v Culture and Arts NPOs Strategic Marketing - Spring 2010 23

Appendix 1: Pivot of age vs kind. Question 7) Which kind of coffee do you like? Question 2) Age: I don't like coffee Light Medium Sometimes one and sometimes another Strong dark roasted Grand Total 55 1 4 1 6 18 -35 3 6 8 2 9 28 36 -54 1 1 6 1 12 21 Grand Total 5 7 18 3 22 55 24