In most cases, being two-faced isn’t seen in a positive light. But Joh. A. Benckiser, parent company of coffee brands Caribou Coffee and Peet’s Coffee & Tea, is hoping its latest announcement—and its decision to play both sides of the coin—is an exception.
The company announced that it would close 80 underperforming Caribou units this month, while at the same time converting an additional 88 locations into Peet’s Coffee & Tea stores.
The conversion, which should be complete within 18 months, will occur largely along the East Coast and in the Midwest, in Washington, D.C., Pennsylvania, Maryland, Virginia, Georgia, Ohio, Illinois, Michigan, and Wisconsin.
After the closings and transitions, 468 Caribou units will span the country in markets like its home state of Minnesota, North Dakota, South Dakota, Iowa, Kansas, western Wisconsin, North Carolina, Colorado, and 10 international markets.
“We’ve had some great success at Caribou in the past several years, including but not limited to our continued growth in Minnesota, expanding our footprint through domestic license locations, launching our 100th international operating location, and expanding our CPG offering,” writes Mike Tattersfield, president and CEO of Caribou Coffee, in an e-mail to QSR.
“That said, after closely examining our performance by market, we have found that some locations outside of our core markets are not connecting with the communities and customers in the way we would like,” he adds. “It was a difficult decision to make, but we do feel that this is the best step forward for our business and our guests.”
But loyal Caribou customers shouldn’t fear for the worst, as this move “isn’t the end of Caribou Coffee by any stretch of the imagination,” says Dennis Lombardi, executive vice president of foodservice strategies at design and consulting firm WD Partners.
Guests will, however, have to adjust their expectations and, in some cases, their loyalty, he says.
“It will be like, ‘Well, that was my favorite coffee shop. I’m sad it’s gone. I’ve got to find a replacement,’” Lombardi says. “If it’s a location where they’re going to put a Peet’s in, they’re probably willing to try Peet’s. But there won’t be any brand loyalty to Peet’s unless it catches their fancy. It will just be like going to any other new store for the first time or new restaurant for the first time.”
While he says Caribou is known in the industry as “a great place to relax for a while,” Peet’s may not have this same appeal.
“That’s not where its brand is,” he adds. “There’s going to be a number of consumers that miss their Caribou Coffee, but you have to look at how you create enterprise value for the whole company, and that’s the driving issue.”
Tattersfield says the closings and transitioning of some Caribou units give the brand a chance to focus on its strengths and core markets.
“Our focus will be innovating our product line, including expanding our food platform,” he adds. “We also look forward to continuing to expand our footprint in the greater Minnesota region, as well as through our domestic and international license/franchise partners; and are excited to focus on our great grocery offering.”
While the transition from Caribou to Peet’s—which Lombardi says is a brand with strong cache on the West Coast—might confuse some customers and employees, he says there are certain steps the company can take to smooth the transition.
“Make sure that you keep some of the same employees, and they can then become [Peet’s] ambassadors,” Lombardi says, adding that it’s important to try to actively convert old Caribou customers into new Peet’s fans.
“They can even offer a coupon or an incentive to come back and try a free Peet’s [item],” he says. “When you open up as Peet’s, you can do an e-mail blast to the Caribou [fans] in the area to say, ‘We’re now Peet’s. Come try us,’ and try to keep the transition going.”
He adds that not all Caribou fans will automatically become Peet’s loyalists, “because the experience will be different. Both brands have great coffee, but the experience in the way that the places feel [is different],” Lombardi says. “The more they keep the same look and feel of the stores, … probably the more the old Caribou customers will stay there.”
Though Tattersfield says the brand continually evaluates “the performance of our coffeehouses periodically to determine if they are meeting customer needs in the area,” he says Caribou has no immediate plans for additional closings.
By Mary Avant