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Local Headlines
Day Trading Wizard
July 1999

Bean Town Coffee Wars
Decemer 1999

Media Maverick
June 2001


The above issues represent a few of our past favorites.


Beantown Coffee Wars:
Foreign powers and local yokels battle it out for your Java dollah, (er dollar)

December 1999

You wouldn't think selling a cup of coffee for $1.50 would amount to big business. But a beverage blitzkreig is underway in Boston, with local shops and consumers under siege from large domestic and foreign coffee powerhouses seeking to broaden their distribution channels, and "brew" up more sales.

On any given corner in Boston's financial district your average cup-a-joe sippin' fool is bombarded with choices-Starbucks, Bewleys (Rebecca's), Dunkin' Donuts and Au Bon Pain, not to mention smaller players such as Bruegger's Bagels and Souper Salads. Since Americans consume more than 300 million cups of hot coffee on an average winter day, it's no wonder blustery Boston is being fought over in the biggest beverage battle since the Boston Tea Party!

Irish Invasion

You'd think the last people on earth to make a push for a share of the coffee market in Boston would be the tea-loving Irish. But, alas lad-you'd be wrong. The boys at the Campbell Bewley Group across the Atlantic in Dublin are very serious about making their Bewley's brand as well known a name in Beantown as it is back in their native Eire.

The Campbell Bewley group, which sells coffee under the brand name of Bewley's, is the largest coffee retailer in Ireland and the U.K. Bewley's made its push into the Boston market in January of 1998 when it purchased the local Rebecca's eateries, a small chain of 15 shops doing approximately $17 million in sales.

While you would think the main reason a company would acquire a luncheon eatery would be to sell sandwiches, Bewley's was more interested in using Rebecca's as its beachhead for building the Bewley's coffee business in America. Take a close look-most Rebecca's stores are lined with shelves loaded with Bewley's coffees and teas.

Just as the Beatles saw America as the big Rock and Roll Music "pond", Bewley's sees America as a giant coffee frontier. According to Michael McAdam, the managing director for Bewley's U.S. operations, the U.S. offers a much larger market, and not just because of size. "In the Ireland and the U.K., tea is the dominant beverage. The ratio of coffee to tea drinkers is 50/50. Here in the U.S. it's 90/10," McAdam explains.

From Dublin to London, Bewley's is serious business. The privately-held firm does almost $300 million in sales annually, and controls 69% of the coffee servings in restaurants, pubs and cafes. According to McAdam, Bewley's is ubiquitous in Ireland: "Asking people back home if they know Bewley's is like asking if they know Guinness. Bewley's has the 2nd highest brand awareness in Ireland after Guinness."

And to show just how serious these folks are, they conducted taste-testing market research before introducing a Bewley's java blend just for Boston. According to McAdam, Bewley's went after a taste appealing to the medium palette, "Some people call Starbucks 'Charbucks' because of its bitter taste. Then there's Dunkin' Donuts, which is watery. We wanted to be right in the middle."

According to McAdam, the blind taste-tests his firm conducted revealed that Boston coffee drinkers prefer the Bewley's blend. "Our coffee is strong, smooth and full-flavored. It's different because it's an African Arabica bean-a mix of Rwandan, Kenyan and West African," McAdam notes.

But those African coffee beans don't come straight to Boston. Bewley's special "Hub blend" is roasted in Dublin, and shipped over every two months.

As long as Bewley's doesn't create a special tax for its coffee, they probably won't have to worry about frustrated Bostonians dressing up as Indians and boarding their ship.

What happened to Au Bon Pain?

Remember that Au Bon Pain at the corner of High and Federal? It's no longer there. Remember that publicly traded company with the NASDAQ symbol ABPCA? Why, it's no longer there either.

Don't fret. Au Bon Pain, the coffee seller and eatery with the name that everyone pronounces differently, is alive and well. It simply has different owners and a new market focus.

Founded in 1981 by Louis Kane and Ron Shaich, Au Bon Pain made an early 1990's foray into ubiquity, putting Au Bon Pains, large and small, on virtually every street corner in downtown Boston. However, sluggish sales at some stores, as well as diverging interests among management, prompted a sale of the chain to BRS, Inc., a New York based investment group which also owns the California Pizza Kitchen.

Meanwhile, co-founder Ron Shaich, more beholden with bread than coffee, left the company to run St. Louis Bread, a chain of bakery/cafes. Originally an Au Bon Pain concept store, Saint Louis Bread was renamed Panera Bread (NASDAQ - PNRA) and is run by Shaich from-of all places-St. Louis, Missouri. Louis Kane is still the Chairman of South Boston headquartered Au Bon Pain.

While owners have changed, Au Bon Pain's main coffee bean is still grown in Costa Rica at the "La Minita Hacienda" plantation. Au Bon Pain currently operates 50 stores in the Boston metro area, and 200 more throughout the country as well as internationally.

Roasters, however, have changed. Going back 10 years ago, Au Bon Pain's coffee was roasted by the Coffee Connection until the chain was sold to Starbucks. Au Bon Pain then switched to California based Peet's, who happily roasted for a few years. But, then Peet's decided they wanted to compete with Au Bon Pain in the Boston market (see Tale of Two Coffees), so Au Bon Pain dropped Peet's (like a bad cup of joe), and now has their coffee roasted in Texas by Distant Lands, Inc.

According to Sila Cansever, VP of Sales Growth and Customer Experience at Au Bon Pain, all the changes in roasters hasn't impacted coffee quality. "We still source a very high quality coffee. We've been buying from the same plantations for 10 years and the bean is roasted to our specifications."

Coffee King

People may complain about new Starbucks stores popping up all over Greater Boston, but Seattle, WA based Starbucks (NASDAQ - SBUX) is actually dwarfed in the number of Boston metro stores by the Quincy, MA original: Dunkin' Donuts. Starbucks, curiously the only coffee shop where a "Tall" is actually a small serving, has 70 stores throughout Massachusetts. Dunkin' Donuts, however, has more than 100 stores in Greater Boston alone.

Dunkin' Donuts, which was founded in 1950 and sold in 1990 to Allied Domeq (OTC - ALDCY), has over 3,500 locations in the United States. London based Allied Domecq is a consumer gorilla. The $7 billion company is the world's #2 distiller with brands such as Beefeater, Ballantine's, Courvoisier and Kahlua. Allied Domecq's retail operations include Baskin-Robbins, Dunkin' Donuts and Togo's Eateries.

Dunkin' Donuts Coffee Facts
(courtesy of Dunkin' Donuts)

Dunkin' Donuts serves 650 million cups of coffee per year, or approximately 1.8 million cups a day.

On a typical day, Dunkin' Donuts serves as many cups of coffee as the Wall Street Journal sells newspapers.

It is estimated that since the first cup was sold in 1950, Dunkin' Donuts has sold over 20 billion cups of coffee.

Tale of Two Coffees

If you're still drinking Maxwell House instant coffee (made from mild-mannered robusta beans), you've missed out on a thirty-year "gourmet" coffee trend. In 1966, Alfred Peet, a Dutch coffee-phile, founded in Berkeley, CA one of the first U.S. coffee shops retailing fine, dark-roasted arabica beans from all over the world. San Francisco Bay area native Jerry Baldwin was a frequent Peet's customer, who after moving to Seattle, opened his own coffee shop named Starbucks.

An enterprising New Yorker named Howard Schulz, stumbled across Starbucks in 1981, and was immediately romanced by the strong coffee. Leaving his native New York, Schulz moved to Seattle to work for Starbucks. Schulz soon developed the idea of turning the mostly whole-bean selling Starbucks into a national chain of Italian like espresso bars, selling coffees by the cup.

Jerry Baldwin thought that was a bad idea for Starbucks, so Schulz went out and started his own espresso chain Il Giornale. Baldwin meanwhile purchased Peet's coffee in 1984, operating the companies separately. Then, in another curious twist of fate, Baldwin decided to sell the six-store Starbucks chain in 1987 and run Peet's exclusively. Schulz jumped at the opportunity to purchase Starbucks, dropped the Il Giornale name, and built Starbucks into a 2,100 store, $1.3 billion dollar company.

Jerry Baldwin apparently has finally realized that a national chain of high-quality coffee shops isn't such a bad idea after all, and has expanded Peet's Coffees and Teas to 49 stores. Two recently opened in Brookline and Lexington, MA, and two more are slated for Harvard Square and Newton Centre.

(source Pour Your Heart Out, Howard Schulz)

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