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Caribou Buyout Bad For A Good Brand

04/26/2013

21909860_BG1As the #2 coffee shop brand in the U.S. Caribou Coffee has had its ups and downs over the past twenty years. Recently it appeared things were perking up (sorry for the pun).

Caribou hired their current CEO Michael Tattersfield from Lululemon in August 2008.  Tattersfield had been Lululemon’s Chief Operating Office. He also had significant experience in the food industry spending 13 years with YUM! Brands in a variety of capacities. Prior CEO Michael Coles stepped aside after failing to generate profits despite growing the top line.

Initially we were critical of some of the early moves Tattersfield made as stated in “Life Is Short – Stay Awake For It“.

Eventuall things started to turnaround nicely. Tattersfield orchestrated a brilliant venture with Kuerig. Through its Keurig K-cup licensing agreement with Greenmountain Coffee (GMCR) offers K-cups, which are an important component of its commercial business. This alone took Caribou into a new league of coffee brands not solely dependent on shops or grocers to sell its product.

Caribou  had become profitable again.

Then, out of the blue, Caribou announced last December that it had agreed to be taken private in a deal valued at $340 million. The Joh. A. Benckiser Group, a German holding company that recently purchased a majority stake in California-based Peet’s Coffee & Tea for $977 million, had agreed to pay $16 per share in cash to acquire Caribou Coffee.

“We anticipate the next chapter in Caribou’s journey will be filled with tremendous opportunities to grow this great brand, with new ownership,” Tattersfield said in a statement.

Then, again out of the blue, the Minneapolis-based coffee company said earlier this month that it was closing 80 underperforming stores and converting another 88 stores to Peet’s Coffee & Tea sites. Caribou said it was making the changes after several months of consideration to better position the coffee company for long-term growth.

We have reason to believe that the Caribou brand will be phased out completely. The name, logo, shop decor – all have a regional, woodsy, Northern feel. Log cabin decor doesn’t play well in Texas. Clearly Benckiser, which has spent 1 billion in cash to acquire Caribou and Peet’s, has a growth plan in mind…at that will play out over the next 24 months. The Peet’s brand can work all across the U.S. It’s likely Benckiser will leverage Peet’s to make a run at Starbucks.

Caribou has a terrific brand. They’ve worked masterfully at creating a consistent and recognizable brand image. Soon that will be gone.

The takeaway? When flirting with investors…be careful what you wish for. Buyout means just that. Dancing with the devil requires quick feet.

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