Scaling “Smallness”: Peet’s Coffee & Tea to Acquire Stumptown Coffee Roasters

Stumptown Coffee Roasters, one of the pioneers in the super-premium set known as “third-wave coffee” and a primary player in ready-to-drink cold brew coffee, is being acquired by Peet’s Coffee & Tea, a premium coffee roaster and retailer which operates over 250 cafes in the U.S. Peet’s, which also sells packaged coffee beans at grocers across the country, said in a company release that Stumptown will remain a separate operating entity, with president Joth Ricci and his staff remaining in place.


“Our plan is really ‘no change,’” Ricci told BevNET. “We will really have the opportunity to learn from each other or utilize different advantages that each of us bring along the way. But we’ll run as two very separate companies. For our team, it’s kind of business as usual.”

Based in Portland, Ore., Stumptown, which is majority owned by private equity firm TSG Consumer Partners, operates in several channels of trade, including retail cafes and wholesale coffee. However, it’s Stumptown’s position as a leading brand of cold-brew coffee that holds significant value for Peet’s president and CEO Dave Burwick, who sees the category as evolving into a $1 billion business within four to five years.

“Cold brew is to ready-to-drink coffee as craft beer is to mainstream domestic beer,” Burwick told BevNET. “It’s higher quality, more flavorful, more relevant to consumers who really care about quality. I’m very confident it will continue to grow dramatically.”

Berwick estimated that cold brew coffee sold at restaurants and cafes is already a “$400-500 million” business.

stumptown-coffee-cold-brewRicci said that there will be no overlap of the two brands — Stumptown products will not be sold at Peet’s cafes and vice versa — with Burwick noting that “you don’t want to confuse the consumer.” While both brands share a common bond in high quality coffee, Peet’s cafes and products are represented nationally, while Stumptown has carved out a select retail and distribution footprint, carefully maintaining its image as a super-premium option. It’s a positioning that will continue beyond the sale to Peet’s.

“I think we’ve done a good job over the years, over the last few years in expanding the brand in new places,” Ricci said. “The biggest opportunity, one, is continued growth of cold brew. With as much work as we’ve done, we’re still in a very small amount of stores and have a lot of work to do as we grow that business. Realizing the full opportunity for cold brew is probably number one. I think number two is thoughtful growth of our whole bean business. And it’s an on- and off-premise business that’s super-premium positioned, so we can continue to treat it that way and make great product and make great coffee. And being able to do that into new markets and being able to do that in certain parts of the country are really important for us.”

Ricci noted that as Stumptown gains access to Peet’s operational expertise and a national distribution network, the company will aspire to “scale the smallness of the brand.”

“We talk a lot about it here: how do you be big and be small at the same time?” Ricci said. “Stumptown is a great brand, and it’s built through certain channels and certain segments of the business. I think we’ll continue to do a lot of work on our own but we’ll definitely want to take advantage of the infrastructure that they had developed over the years. They’ve done a great job of building a national system. And we would want to certainly plug into that where we can.”

“And we’ll continue to be very thoughtful about how we grow the brand in new markets,” he continued. “Peet’s has a much more extensive network in terms of route-to-market, and the way that they run their logistics and their operations is something that we would definitely like to look at down the road… as far as utilizing it in places that we’re not in today. Our ability to scale this business becomes greater by utilizing some of this infrastructure.”

Meanwhile, Peet’s is likely to lean on Stumptown’s proficiency in production and distribution of cold-brew coffee with an eye on launching its own ready-to-drink offering. Noting that Peet’s already sells cold brew coffee made in its cafes, Burwick said the packaged category “is big enough and growing fast enough that we easily can play with more than one brand and we will.”

“We can definitely learn from the pioneering work that Stumptown has done in this category,” Burwick said. “On the surface it seems simple, but it’s actually quite complex to build a distribution network, to maintain the quality of the product. We’ve benefited just by watching Stumptown, now we’ll benefit from learning more directly from the team there.”