Timing coffee machine maker PEET next leg up towards $60
Spreading single-serve coffee systems
Single-cup brewers satisfy consumers' desire for convenient, high-quality coffee. Popular with early adopters, "it doesn't feel like a fad," Tarantino says. Green Mountain shares, by the way, have shot up 166% this year.
Supporters of the Diedrich acquisition argue that the popularity of Peet's brands—which now include Godiva—and its ability to distribute products could boost the popularity of single-cup brewing. "The combined company will accelerate the adoption of the K-Cup single-serve system," Diedrich Coffee Chairman Paul Heeschen told analysts on Nov. 3.
Analysts warned that the deal requires $140 million in debt and could hurt 2010 earnings. But executives said earnings-per-share could double by 2011. "This combination of Peet's and Diedrich is a significant win for everybody," Peet's chief executive Patrick O'Dea told analysts.
One impact of the recession has been a move toward drinking more coffee at home or at workmdash;where it is generally cheaper—and less of it at restaurants and coffee shops. But even that trend seems to have softened in recent months, Rhinehart says. He believes the popularity of coffee shops such as Starbucks has survived the recession. "People are returning to the coffee house because it is a place where they're comfortable and a place they get benefits other than coffee," Rhinehart says.