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Peet's Coffee & Tea Tara Alcantara-Beers Karol Caballero Yizhe Liu Daniel Brockman UC. Berkeley Extension Strategic Marketing Ming Yang May 24 th 2010

Peet's Mission & Vision "To enable and inspire customers to enjoy the daily pleasure of Peet's Coffees & Teas by providing a distinctive, superior product, superior coffee and tea knowledge and superior service to every customer, every day.” “To be the gold standard specialty coffee and tea brand available to the world, with one of the most dedicated and loyal customer followings of any brand.” MISSION VISION Strategic Marketing - Spring

General Description of Peet's Coffee & Tea Strategic Marketing - Spring Peet’s is a specialty roaster of whole bean coffee & teas based in Emeryville, CA Peet's founded by Alfred Peet in 1966 in Berkeley, California Alfred focused on the quality of the coffee Original store located at corner of Walnut & Vine near U.C. Berkeley In 1979 Alfred sold Peet's but stayed on as coffee buyer Roasting plant is located in Alameda Peet's Website/Wikipedia

ALFRED PEET-FOUNDER Strategic Marketing - Spring

Peet's Company Info US Statistics: Public Company Retail Stores: 192 in 6 states Employees: 3750 Sales: 311 million Competitors: Starbucks, Tully's, Coffee Bean & Tea Leaf, local coffee shops in the retail stores channel, and Kraft and J.M. Smucker in the grocery channel Yahoo Finance Strategic Marketing - Spring

2009 Sales Breakdown Retail Sales (stores only) : Retail stores remained stable 7% comprising 65% of net revenue Retail store sales were 65% of net revenue Specialty (consists of grocery, foodservice & office) Grocery Sales 22% comprising 20% of net revenue Sales of specialty coffee was 84% of net revenue Peet's Coffee & Tea, Annual Report on Form 10-K for 2009 Strategic Marketing - Spring

Quarterly Financials Revenues, Thirteen Weeks Ended (dollars in thousands) APRIL 4, 2010 March 29, 2009 Increase/(Decrease) Grocery $ 18,643 $ 13,387 $5, % Foodservice & office 8,480 6,706 1, % Home delivery 4,002 4,029 (27) -0.7% Total specialty $ 31,125 $ 24,122 $ 7, % Form 10-Q Quarterly Report Filed May 14, 2010 Strategic Marketing - Spring

Grocery to be Peet's Strength Peet's is focusing on Grocery Growth as Starbucks Shuts Cafes Revenues growth year over year in the 1st quarter of 2010  4% in retail stores  39% in grocery Operating margins in the 1st quarter of 2010  9% in retail stores  26% in grocery, office and home delivery Peet's even has a separate Grocery Website Strategic Marketing - Spring

Target Customers Customers who care about quality, variety, convenience: Quality: customer values most Like strong, dark coffee Annual household income: +125,000 Peet's drinker buys coffee from specialty (Peets, Starbucks) Peetniks: Strong loyalty customer Morning coffee every day Members of the Peetniks loyalty program Passionate about Peet's products Exclusive benefits to active recurring orders Strategic Marketing - Spring

Products Highly selective sourcing: Carefully chosen beans, taste coffees again and again Coffee and Tea Expertise Paying the highest prices for quality Delivered fresh: Use the freshest beans within 24 hours of being roasted Brewed fresh every 30 minutes or less Never re-steam milk Artisan roasting style: Roast in small batches Draw out the depth of flavor Strategic Marketing - Spring Peet's Coffee & Tea Inc, Form 10-k annual report

Key Success Factors Expertise in Coffee and Tea Sophisticated information systems infrastructure  Business Intelligence  ERP, POS and CS Freshness Strategic Marketing - Spring

Sustainable Competitive Advantage DSD - Direct Store Delivery system  From Roaster to Shelf in 24 hours Artisan roasting style  Small batches Highly selective sourcing  Long-term relationships with exporters, brokers & growers Strategic Marketing - Spring

Taste Test 12 Strategic Marketing - Spring 2010

Promotional Efforts In-Store Promotions Partnerships with Foodservice Operators Online Presence Community Service Strategic Marketing - Spring

Price Prices of selected medium (grande) drinks Starbucks Peet's Regular coffee $ 1.85 $ 1.85 Espresso Caffe Latte Retail stores in Petaluma, California, May 2010, Daniel Brockman Strategic Marketing - Spring

SWOT Analysis Strategic Marketing - Spring New Product Launch Godiva flavored Coffee Geographic expansion Partnerships Airline Groceries Candy Expand coffee and tea selection Instant canned, bottled Weak brand recognition Limited food selection Highly Competitive Market US Economic Slowdown Effective distribution network High quality ingredients Community involvement High quality collaboration with sources S T O W

Critical considerations Grow the company Excellent coffee experience Responsibility Profitability Strategic Marketing - Spring

Alternative 1: Airborne Strategic Marketing - Spring The Concept: Partner with airline. Learn to serve excellent fresh coffee at 8,000 feet. Trials on flights from Oakland Airport, 1 mile from roastery. Pros: Creates markets distant from California in travelers' homes Cons: Can we train airline crews to serve excellent coffee? Recommendation: Conduct a trial and assess.

The Concept: Expand Grocery eastward. Driver: Customer migration to specialty coffees. o Growing customer awareness of Peet's. Pros: Peet's has financial assets to invest Rapid growth: 39% in 10Q1 vs. 09Q1 Profitable: 26% operating margin Better than expanding retail stores Cons: What are the limits to Grocery channel growth? Large competitors Recommendation: Invest in Grocery star Alternative 2: Invest in Grocery Strategic Marketing - Spring

Alternative 3: Instant and Canned Strategic Marketing - Spring The Concept: Introduce canned and instant lines of coffee. Pros: Reach out to new customer segments. Synergic use for store delivery system. Cons: Canned and instant coffee isn't fresh. Compromise existing standard of quality. Recommendation: Let Starbucks do it.

Summary of Recommendations Try airborne Peet's coffee. Don't produce Instant or Canned coffees. Expand distribution through Grocery channel. Strategic Marketing - Spring

Questions? 21

Appendix 1: 22

Community Service: Partnerships with International Non-Profit Organizations  Grounds for Health  Coffee Kids  TechnoServe  Utz and Rainforest Alliance Certification Global Initiatives  KIMSSA  Las Hermanas  The Butterfly School  International and American Red Cross Local Sponsorships  Local School fundraisers  Back to the Roots Ventures  Athletic fundraisers  Culture and Arts NPOs Appendix 2: Promotional Efforts Strategic Marketing - Spring

Appendix 1: Pivot of age vs kind. Question 7) Which kind of coffee do you like? Question 2) Age: I don't like coffeeLightMedium Sometimes one and sometimes another Strong dark roasted Grand Total Grand Total