Grounds For Discussion: JAB's Peet's Buys Stumptown Coffee From TSG

Portland hipsters, still assumed to be mourning the ripping up of a garish '30s-era carpet from the local airport this summer, were hammered by the news yesterday that Peet’s Coffee, which itself was snatched up by a Luxembourg-based conglomerate controlled by a “secretive” German family in 2012, had acquired its beloved Stumptown Coffee.

But Stumptown, which was founded in Portland in 1999 and now boasts a dozen locations in Portland, Seattle, Los Angeles and New York, really sold out four years ago when founder Duane Sorenson unloaded a majority stake to a private equity firm, TSG Consumer Partners. The Wall Street Journalreported in May that TSG was looking to sell its 90% stake.

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Peet’s bought all of TSG’s shares as well as Sorenson’s remaining piece of the action for an undisclosed price, the WSJ’s Leslie Josephs reports. Peet’s itself was acquired by Joh. A. Benckiser (aka JAB), the investment vehicle for the Reimann family of Germany, for about $1 billion in 2012, Reuter’s Jessica Wohl reported at the time.

“Peet’s, which was founded in 1966, dwarfs Stumptown with its 236 retail locations, along with a packaged coffee business,” Peet’s CEO Dave Burwick tells Josephs, who writes that it will use that expertise “to help Stumptown grow its sales in grocery stores and other outlets.” 

“Sorenson, Stumptown’s founder, who was called ‘the Che Guevara of the rock-star barista movement’ in an Esquire magazine article by the competing coffee master Todd Carmichael, once worked behind the bar at a Peet’s in Portland, Ore. While he was there, he got to know Doug Welsh, Peet’s roast master,” writes Stephanie Strom in the New York Times.

That Esquire post ran in 2011 after Sorensen “sold his life's work to the highest bidder,” as Carmichael, co-founder of La Colombe Torrefaction and the first American to cross Antarctica to the South Pole alone on foot, put it.

Marjorie Skinner picks it up from there in the Portland Mercury: “Stumptown already caused a bit of a citywide freakout … when news got out that the iconic Portland company, which represents many of the values associated with local pride — from its legendary treatment of employees (hello, staff massage therapist) to its artisanal approach to beans and brew — had accepted a majority investment from the New York-based TSG Consumer Partners,” Skinner blogged as news of the sale to Peet’s broke yesterday. “Nonetheless, after the dust settled, founder Duane Sorenson's mini empire has carried on in much the same spirit it always has.”

That seems to be the intent of its new owners, too, besides market domination.

 “The holding company, controlled by Germany’s secretive Reimann family, is also the largest shareholder in fragrance group Coty and has a minority stake in the UK’s Reckitt Benckiser,” write Lindsay Whipp and Arash Massoudi for Financial Times

“Under the leadership of three consumer industries executives — Bart Becht, Olivier Goudet and Peter Harf — JAB is looking to take on Nestlé, the global market leader in coffee. It already has interests in Jacobs Douwe Egberts, which was formed last year by the merger of the coffee business of Mondelez International and DE Master Blenders 1753.”  

It also purchased a majority stake in Minneapolis-based Caribou Coffee Company, the second-largest company-owned premium coffeehouse operator in the U.S. based on the number of coffeehouses, for about $340 million in 2012.

“Stumptown is among the largest companies to have championed the ‘third wave’ of coffee, in which cultivation, roasting, and brewing is treated similar to wine and other artisanal goods,” Max Nisen writes for Quartz. Earlier in the story, he points out that the news of its sale “was enough to send coffee snobs into a panic, though Peet’s said that Stumptown would continue to operate independently.” 

Indeed, “though Stumptown will have full access to Peet's resources, the roaster will remain independent and will be run separately,” Stumptown president Joth Ricci tellsThe Oregonian’s Samantha Bakall. 

“Our team and … Sorenson will stay completely intact,” Ricci says. “As we looked at the opportunities together, they've really admired what we've done as a Portland brand and company and what's important to them is that it stays that way.”

Stumptown’s company history begins with the observation: “Coffee is about pleasure. It’s that moment when your hand is warmed by the mug, you bring it up to your nose, inhale deeply and then take a sip.”

It’s also about creating a compelling origins story and a feisty brew that attracts the hipsters and their Benjamins, which in turn attracts the conglomerates and their equity, which in turn makes everybody happy. Right?

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