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|Subject: Peet's Coffee and Tea||Date: 3/8/2006 8:23 PM|
|Author: pencils2||Number: 12 of 23|
Peet's Coffee and Tea
~Starbucks founder is on the board of directors
~Growing consistently and increasing revenue
~Strong balance sheet for a small-cap
A Dutch immigrant, Alfred Peet, started Peet's Coffee and Tea. Peet arrived in San Francisco in the 1950's and opened the first Peet's in 1966. The store did very well; many people would line up just to get a fresh cup of coffee. A second Peet's opened in 1971. Inspired by Peet's, Jerry Baldwin went to Seattle and started Starbucks. Alfred Peet sold Peet's in 1979 to a coffee machine importer, Sal Bonavita. Two more stores were built in a span of four years after that, then surprise, surprise! Jerry Baldwin bought Peet's Coffee and Tea in 1984. Because of increasing duties at both Peet's and Starbucks, Baldwin sold Starbucks in 1987, and is still on Peet's board of directors today. Peet's only had four stores once Baldwin took over. Baldwin had resisted aggressive expansion at Starbucks, but he realized Peet's days as a small company should end. He let new blood come in to start expanding Peet's. Soon 5-6 Peet's were being built a year, and the wholesale business was picking up business as well. Peet's IPO was in 2001 when they wanted to really become a gourmet coffee supplier and reach new customers.
Peet's Coffee and Tea is a marketer of fresh coffee beans and a specialty coffee roaster. Freshness is all Peet's. Peet's has strict freshness rules for their coffee and tea, something that giant Starbucks doesn't quite have (They have some less strict freshness standards as far as I know). Peet's offers fresh tea leaves, another thing that isn't too common in the U.S. these days. Peet's also offers fresh pastries in their retail shops.
Peet's also does the wholesale business, you will see their coffee and tea in many grocery stores. Peet's grocery accounts have gone from 130 to 3500 in the last three years!
Peet's has one roasting facility, but they are planning to build a new facility this year to meet their total demands. Now, you may be wondering, why are there so few Peet's retail shops? First, Baldwin was not very heavy on expansion. He opened one store per year, which is why he stepped aside as CEO and let a more aggressive team come in to expand the business. Second, Peet's has only recently boosted their wholesale business to a great number, now they are making much more revenue from that business. I think that management did a good job being patient, building up the cash, and now they are doing heavier expanding.
At year-end, Peet's had 92 retail shops, 20 built last year. For fiscal 2006, Peet's hopes to build 23-28 new shops and that roasting facility. Look at this graph to see Peet's sales, retail makes nearly twice as much as specialty sales (Grocery outlets is the main specialty).
Construction on the new roasting facility (It will be in Alameda, California) is scheduled to start this April and finish in December. Once it is finished, the estimated cost will be around $24 million.
13 weeks 14 weeks 52 weeks 53 weeks
Peets currently has a market cap of 420.67 million. Peet's has a very nice $53.08M in cash with no debt, a current profit margin of 6.1% and operating margin of 8.96% (Trailing Twelve Months). These charts show the situation.
LIABILITIES AND SHAREHOLDERS' EQUITY
Peet's ended 2005 with cash and cash equivalents of $70M, compared to $64.3M at year-end 2004. What I really like here is this: Peet's is doing the heaviest expansion of its history. This is the most aggressive they have been ever! But they are still increasing revenues, improving sales, and they aren't racking up too much debt. I have never seen a small-cap company do this so well (Although I'm sure you have!), if they can continue to do what they have been doing, I believe this could be an opportunity at our feet.
Patrick O'Dea, CEO, age 43
Patrick has served on Peet's board of directors since May, 2002, I have been impressed with his management of the company and I hope he will be CEO for many more years. Prior to working at Peet's, he was CEO of Archway/Mother's Cookies and Mother's Cake & Cookie Company for 4 years. He has had various other jobs at Stella Foods and Procter & Gamble.
Thomas Cawley, CFO, age 44
Thomas has been Peet's CFO since July, 2003. Prior to working at Peet's, he was CFO at Gap Brands, had various jobs at Yum! Brands, PepsiCo, Pizza Hut, The Quaker Oats Company, and General Foods.
James Grimes, Vice President of Operations, age 49
James has served at Peet's since July, 2002. Prior to this, James worked with Archway/Mother's Cookies, Mother's Cake and Cookie Company, Frito Lay, and Procter and Gamble. In 2001 he founded Supply Chain Consulting.
Peter Mehrberg, Vice President, age 46
Peter has been Vice President of Peet's since 1997. He has worked in some different roles with the company. Mehrberg served as Director of Real Estate from 1994 to 1997. Before joining Peet's, he worked in law and real estate.
Bruce Schroder, Vice President, age 45
Bruce has been VP since 2003, he is also the General Retail Manager and has worked with various parts of Peet's. Bruce was also CEO for HomeGain.com, worked at PepsiCo for 16 years, The North American Coffee Partnership, and SoBe.
To learn about Peet's roasters, take a look at this: