Peet's Coffee to buy wholesaler DiedrichPeet's Coffee to buy wholesaler Diedrich

Lisa Jennings

EMERYVILLE Calif. Peet’s Coffee & Tea Inc. has agreed to acquire Diedrich Coffee Co. for about $213 million in cash and stock, a move that officials said would help the chain capture a larger share of the wholesale coffee market.

The transaction includes Irvine, Calif.-based Diedrich’s portfolio of brands, including Diedrich Coffee, Coffee People and Gloria Jean’s, sold primarily online and to restaurants and specialty retailers.

Pat O’Dea, Peet’s president and chief operating officer, said Monday the acquisition would enable Peet’s to enter the rapidly growing single-cup coffee business with Diedrich’s K-Cup coffee packets, which are used with a Keurig Inc. brewing system.

“Together, Diedrich and Peet’s will create new growth opportunities for Diedrich’s brands and further drive household penetration of the K-Cup market,” said Paul Heeschen, Diedrich's chairman. “As a result, this combination benefits shareholders of both companies, customers, employees and our K-Cup business partners. Our already strong K-Cup business will accelerate under Peet’s in a way we could not achieve alone.”

K-Cup accounts for about 90 percent of Diedrich’s overall sales, which O’Dea predicted would reach up to $95 million for the fiscal year ending in June 2010.

With the acquisition, O’Dea added, Peet’s sales would move from an estimated range of between $330 million to $340 million to a range of $440 million to $460 million for fiscal 2010.

Over the past few years, Diedrich has been shifting its focus to the wholesale coffee business, selling its 39 retail locations in 2007 to Starbucks Corp. and other companies, and selling the 102-unit domestic franchise operation for Gloria Jean’s Coffee earlier this year to Praise International North America Inc., the U.S. master franchisee for the brand.

Peet’s, which operates about 190 coffeehouses domestically and sells packaged coffee in grocery stores, has been building its infrastructure to expand the brand beyond its core West Coast market, O’Dea said Monday.

In July, for example, the chain announced plans to market a line of Godiva brand premium specialty coffees, which are expected to be in 4,000 stores by the holidays.

Contact Lisa Jennings at [email protected].