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Originally published December 28, 2007 at 12:00 AM | Page modified December 28, 2007 at 12:17 AM

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Retail Report

Peet's shuns Starbucks' grande growth plan

Peet's Coffee & Tea, the Bay Area company that inspired Starbucks' founders in the early 1970s, is doubling its presence in Seattle...

Seattle Times business reporters

Peet's Coffee & Tea

The founders of Starbucks discovered Alfred Peet and his Northern California coffee and tea company in the early 1970s while looking for a supplier for their startup in Seattle.

Founder: Alfred Peet launched Peet's in Berkeley in 1966. Peet, who died earlier this year, is credited with starting the U.S. specialty-coffee craze.

Headquarters: Emeryville, Calif., across the Bay Bridge from San Francisco.

Sales: About $250 million this year.

Flavor: Peet's prides itself on hand-roasting coffee beans for a roast that is deep but not burned.

Early ownership overlap: Starbucks' owners bought Peet's in 1984 and three years later sold Starbucks to Howard Schultz and a group of investors.

Different paths: Both companies are publicly traded now — Peet's with nearly 170 stores, mostly on the West Coast, and Starbucks with more than 15,000 stores worldwide.

Peet's Coffee & Tea, the Bay Area company that inspired Starbucks' founders in the early 1970s, is doubling its presence in Seattle to six stores by the end of 2008 and hopes to have 20 stores here eventually.

Despite close ties to Starbucks, including a shared love of deep roasting and an overlap in ownership during the 1980s, Peet's is the anti-Starbucks when it comes to store growth.

It has almost 170 stores nationwide, more than half of them in the Bay Area, and plans to open 30 new shops in 2008. Starbucks has more than 15,000 stores around the world and is adding about seven a day.

Peet's opened its first Seattle store in Fremont in 2003. Last month, a fourth store opened on Queen Anne, and another shop will open on Capitol Hill next month. A sixth store is planned between Queen Anne and Magnolia later in 2008.

Peet's CEO Pat O'Dea says the company would love to have 40 or 50 stores in the Seattle area, because it's a market where people love good coffee.

"We'd rather go into a really well-developed coffee market and provide a superior, fresh and distinctive cup of coffee than go into a market where people haven't been introduced properly to specialty coffee and maybe don't appreciate it as much," O'Dea said.

But he doubts Peet's will find more than 20 suitable locations here.

"In Seattle, it's tough to find a good site, because apparently there are a lot of coffee shops up there," he said.

Peet's isn't worried about being a tortoise to Starbucks' hare in the race for locations.

It is focused on expanding the more profitable business of selling coffee beans in grocery stores.

Two-thirds of Peet's sales comes from retail stores, but two-thirds of its profit comes from the grocery and direct-to-consumer businesses.

Peet's plans to expand its grocery sales into 15 to 20 new markets in the Eastern U.S., where it has no immediate plans for more coffee shops.

That's where the growth is, because most coffee in the U.S. is still brewed at home, said Jerry Baldwin, a Starbucks co-founder who later bought Peet's with other original Starbucks owners.

They sold Starbucks to Howard Schultz and another group of investors in 1987; Baldwin and another Starbucks co-founder, Gordon Bowker, sit on Peet's board of directors.

"I rarely go into Starbucks stores. I don't even go into many of our [Peet's] stores any more," Baldwin said. "I prefer to brew our coffee at home."

— Melissa Allison

Tidbits

A new Sears Outlet store opens Saturday in Shoreline at 15711 ½ Aurora Ave N. The store will sell appliances, TVs, mattresses and other items that have been returned, discontinued or slightly damaged, at up to 60 percent off. It will employ about 25. — AM

There's a Starbucks every 0.22 square mile and one for every 1,780 people in the 98109 ZIP code north of downtown Seattle, according to a Web site that tracks Starbucks saturation and helps locate restaurants of all kinds.

The folks at www.foodio54.com/starbucks used company information and U.S. census data to create the feature, which went live in July. McDonald's will be next, said the site's co-founder, Mike Van Heyde. — MA

Amazon.com added Warner Music's catalog of artists to its virtual MP3 music-download store. More than 2.9 million songs are now available without digital rights-management software, most for 89 cents to 99 cents each.

Amazon launched the MP3 store in September with nearly 2.3 million songs from such labels as Universal Music Group and EMI Music. Artists from Warner Music include Red Hot Chili Peppers, Rob Thomas, the Eagles, Green Day and Madonna. — AM

Tully's founder and Chairman Tom O'Keefe will speak at the Half-Day Business Conference presented by Staples on Jan. 29 at the Washington Athletic Club. Tully's has struggled for years to make money and this year suspended a planned initial public offering.

O'Keefe is one of two speakers and eight breakout sessions intended to help businesses know customers better, improve their marketing efforts and increase their bottom lines. — MA

Skinny can mean a lot of things in Starbucks-speak: low-fat, no-fat, no whipped cream. Now the coffee giant has added another possibility: Starbucks' new "skinny platform" features nonfat lattes with sugar-free syrup. A Starbucks news release says customers will save 700 calories and 35 grams of fat a week if they replace a daily 12-ounce vanilla-latte habit with skinny vanilla lattes. — MA

Espresso Americano International of Camano Island, which already has 189 stores in six countries, recently signed a partner for stores in China. Wealth By Health, doing business as Espresso Americano China, plans to open 15 airport locations in the first quarter. — MA

Discovery Bay Games of Port Townsend has a new card game aimed at coffee lovers. Called Barista, it challenges players to match the beverage shown on the roll of four dice with cards in their hands — possibilities include a double tall nonfat latte or triple grande soy mocha. The game sells for $14.95 at Barnes & Noble. — AM

Retail Report appears Fridays. Melissa Allison covers the food and beverage industry. She can be reached at 206-464-3312 or mallison@seattletimes.com. Amy Martinez covers goods, services and online retail. She can be reached at 206-464-2923 or amartinez@seattletimes.com.

Copyright © 2007 The Seattle Times Company

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About Retail Report
Retail Report is a look at the trends, issues and people who makeup the dynamic and versatile retail sector throughout the Puget Sound region. Every Friday with Melissa Allison and Amy Martinez. Send tips or comments to mallison@seattletimes.com or amartinez@seattletimes.com.

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