Peet's Acquires Two Specialty Coffee Leaders Within Weeks

Two Acquisitions in Rapid Succession

Less than a month after buying Stumptown Coffee Roasters outright, Peet's Coffee and Tea announced it had acquired a majority stake in Intelligentsia Coffee. Reaction across the specialty coffee sector split sharply: some greeted the news with anger, others with enthusiasm.

Those with the bleakest reading treated the deals as the death of third-wave coffee, attaching that contested label to just two companies while overlooking the many roasteries that Stumptown and Intelligentsia had inspired. Observers with a business orientation saw the purchases as a natural stage in the maturation of an established industry. After all, if other roasteries can raise tens of millions of dollars in investment rounds arranged by Goldman Sachs, why shouldn't a large coffee company buy one of them? Even that more hard-nosed view leaves an open question: no third-wave favorite has yet demonstrated it can expand while preserving the quality and appeal that built its reputation.

The Sales Were Expected; the Buyer Was Not

Whichever side of the doom-versus-celebration split one takes, these sales should not have come as a surprise. What was startling was that both went to the same buyer. It had been known since at least May that Stumptown's majority stakeholder, TSG Consumer Partners, wanted to sell the company, a move anticipated from the moment TSG acquired a ninety-percent share of the roastery from founder Duane Sorenson in 2011. Intelligentsia had said at the beginning of October that it was seeking a buyer and expected roughly $100 million from a deal. Peet's buying out TSG and Sorenson's remaining stake was therefore no shock, though it still ranked as the biggest café story of the month—until the genuine surprise of Peet's following up by purchasing Intelligentsia.

Statements Limited to Public Relations Language

All three companies are private, so no purchase details were disclosed, and beyond their respective press releases the companies confined their comments to public relations boilerplate. Peet's issued two press releases, its only business announcements of the year, and they were nearly identical. "Stumptown, one of the leading players in the fast growing ready-to-drink cold brew coffee business, will continue to operate independently while having full access to Peet's resources and scale," read the first. The second stated: "Intelligentsia will continue to operate independently and have full access to Peet's resources and scale."

Peet's identified Stumptown's vibrant cold-brew business as a major attraction behind the purchase. The company also said that Stumptown president Joth Ricci would stay on, along with the company's name and branding; it made the same commitment regarding Intelligentsia's Doug Zell, Emily Mange, and Geoff Watts. Still, expect Stumptown and Intelligentsia to appear in more retail locations. Every indication suggests Peet's intends to use its distribution networks to boost sales at its acquisitions.

A Year of Major Fundraising

Blue Bottle, Philz, and La Colombe all mounted large fundraising efforts during the year. Peet's moves add another test case for how large specialty coffee can become.