Diedrich Coffee gives up fight
Local chain sells 47 retail outlets to Starbucks for $13.5 million to focus on wholesale bean business.
The Orange County Register
Irvine-based Diedrich Coffee, conceding defeat in the coffee shop duel with Starbucks, agreed to sell the 47 stores it owns to its Seattle rival for $13.5 million.
The local company will remain in business as a roaster and wholesaler of coffee beans. The sale includes all company-owned Diedrich and Coffee People locations. Franchise stores aren’t included in the sale.
All “non-management employees in good standing” will be offered positions with Starbucks, and managers will be provided the opportunity to interview for positions, the company said.
Here’s the company’s statement:
Diedrich Coffee Announces Long-Term Growth Strategy; Company to Focus Resources on Growing Wholesale and Franchise Businesses
Announces Changes to Board of Directors
IRVINE, Calif., Sept. 14 /PRNewswire-FirstCall/ — Recognizing its inherent strength as a premier roaster of imported specialty coffee and the positive trends in the wholesale market, Diedrich Coffee, Inc. (NASDAQ:DDRX) one of the largest specialty coffee suppliers in the United States, announced today that it plans to strengthen its two core business segments by increasing the resources dedicated to its expanding wholesale business and by narrowing its retail focus to its franchise stores.
“Diedrich Coffee has a long and storied tradition of selecting and roasting the finest coffees in the world,” said Steve Coffey, chief executive officer of Diedrich Coffee. “The changes that we are announcing today allow us to utilize our core strength as the premier roaster of specialty coffee and to fulfill our promise to sell great coffee to the widest possible market.
“With the trends shifting towards specialty coffee in restaurants, offices, and specialty stores, Diedrich Coffee has experienced significant growth in our wholesale business. We are well positioned to be a strong competitor with the potential for greater growth and profitability in the future.”
According to Mr. Coffey, Diedrich’s wholesale operation has grown substantially over the past 12 months, growing at a rate of 46% over the prior year with sales last quarter trending up at 50% over the same period last year. Third-party sales for the quarter ended June 28, 2006 represented 78% of all coffee sold by the company.
As part of its plan to narrow the focus of the retail side of the business on its franchise operations, the company plans to close its Diedrich Coffee and Coffee People company-owned locations but retain the brands for its wholesale and franchise operations. To this end, the company announced that it entered into an agreement today to sell most of its company-owned locations to Starbucks Corporation for approximately $13.5 million. The completion of the sale is subject to a number of conditions including the approval of Diedrich Coffee’s stockholders and the receipt of various approvals, permits and consents in connection with the transfer of the store locations. Assuming these conditions are met, it is anticipated the sale will be completed within the next few months.
The Company noted that its agreement with Starbucks provided the best solution for the company and its landlords. Most importantly it allowed the company to provide its employees with the smoothest transition possible. All non-management employees in good standing will be offered positions with Starbucks and managers will be provided the opportunity to interview for positions.
The company said that its Gloria Jean’s franchise system and the franchisee-owned Diedrich Coffee stores are not directly affected by the sale transaction or other strategic changes. “Our franchise partners will benefit from our new strategic direction as they will have a financially stronger and more focused company as their partner without the distraction of also running two company store systems,” Mr. Coffey said.
The Diedrich Coffee and Coffee People stores are not expected to transition for several months. “Until then, the stores will remain open and continue to serve our guests as they have in the past. Additionally, our customers will be able to continue to purchase the same rich and flavorful coffee at franchise locations and through the company’s websites, http://www.diedrich.com and http://www.gloriajeans.com.” Mr. Coffey added.
In an unrelated matter, the company also announced today that Peter Churm has retired from the board of directors. The board has appointed Greg Palmer to fill the vacancy. Most recently Mr. Palmer served as president and chief executive officer of RemedyTemp, Inc. “On behalf of the board of directors I would like to thank Peter for his many years of exemplary service and also express how pleased we are that Greg is joining the board. His executive management background and experience in sales oriented companies will be invaluable as the company moves forward.” said Paul Heeschen, Diedrich Coffee’s Chairman.
About Diedrich Coffee
Headquartered in Irvine, California, Diedrich Coffee specializes in sourcing, roasting and selling the world’s highest quality coffees. The Company’s three brands are Gloria Jean’s Coffees, Diedrich Coffee and Coffee People, which it sells through more than 800 wholesale accounts including coffeehouses, office coffee service distributors, restaurants, specialty retailers as well as direct-to-consumer via the Internet. The company’s 200 domestic retail outlets, the majority of which are franchised, are located in 33 states. For more information about Diedrich Coffee, call 800/354-5282, or visit the Company’s Websites at http://www.diedrich.com, http://www.gloriajeans.com, or http://www.coffeepeople.com.
Be My Blog 
HOLY FUCK! Well, I’m glad I got to hang out at the 17th street store back when it was still cool. If it wasn’t the end of an era before, it most certainly is now.
The Coffee People sale is going to suck for us up here. It’s basically the only chain that’s not Starbucks. It’s still about 50/50 between Starbucks and mom-and-pop stores, but when Coffee People closes or switches to Starbucks, they’ll be the only big chain around.
Also: “Mr. Coffey” Ha Ha
LikeLike
Is the coffee people coffee any good? I know it was when I was in Portland in 1995 (!) but I heard it became kind of pointless when DiedrichHugeCo started roasting it in an industrial facility etc.
LikeLike
Honestly…. I have no idea. I think I’ve only been in there once and that was because a friend wanted one of their ice cream concoctions. I’ve only been going to the smaller places. Well, mostly I’ve been going to bars and getting my beans from Stumptown.
LikeLike
Their coffee is kind of gross. Starbucks is better.
LikeLike
Yeah, that’s what I hear. Same stuff as the “new” bad Diedrich has been for the last few years, roasted in vats and left around for too long. Oops.
LikeLike
Starbuck is crap compared to Diedrichs. You probably buy those ice cream drinks and don’t even taste the coffee
LikeLike
Did you actually drink Diedrich coffee in 1996, and then ten years later? You could taste Martin leaving. There’s no difference between them and Starbucks now except Starbucks treats their employees better.
If you want good coffee, go to Martin’s new place, Kéan. He roasts it in the building, in front of you, the way he did 20 years ago.
Also: that was kind of rude. Perceived anonymity is not an excuse for gratuitous insult. Would you say that to my face? I think not!
LikeLike
You don’t have to actually look at them, but you have to look in their direction, so it feels like you’re looking at them.
LikeLike
Diedrich vs Starbucks
You obviously have no gustatory perception. How old are you…12?
LikeLike
Re: Diedrich vs Starbucks
Looks like Comic Book Guy got out the thesaurus again.
LikeLike
thats really the end of an era man. for me so many good times. uh, i guess there’s just ruba and kean now!
LikeLike
I’m looking forward to a Panera on 17th. It’s just a chain, but they have free wifi and lots of power plugs and lots of places to sit and PASTRIES. Mm.
LikeLike
I have heard good things about panera. rob swears by their chicken sandwiches. lets catch up there next time I visit.
LikeLike
AN ENABLING PASTRY SYNERGY CONCEPT
LikeLike
Sorry to hear that.
Btw, there is a Gloria Jean’s Coffee in Australia, which is somehow connected with a scary right-wing pentecostal group known as the Hillsong Church. Are they connected?
LikeLike
They have the same origin but I think the franchising is different all over the world, same brand different companiess. Here they’ve been owned by Diedrich for a few years. They sell crap flavored coffee in shopping malls. It looks from what I can see like the Australia-basedi company is totally separate.
LikeLike
I wonder if they’ll move starbucks into that building?
LikeLike
I wonder too. It would be a shame to waste that patio but that building is a disaster. And big patios aren’t such a win financially. Restaurant math likes small places with about 10 seats and everyone keep moving and keep buying.
LikeLike
*pours a mocha on the curb*
LikeLike
I put my large dark roast into a magnum bottle and tipped it out to…sophia and kelly.
LikeLike
WTF – OMG
NOOOOOOOO – say it isn’t so – WHYYYYYYYYYYYY
hmmmm – maybe they’ll get rid of our pest problem – it still wouldn’t be worth it.
LikeLike
i’ve been hearing speculation about this deal for a couple of years. corporations grow like cancers, and like tumors they’ll live until they’ve killed us all.
or until they’ve fulfilled the limits of their limits, anyway. just like how you can only as tall as your skeleton. (i forget what those “cause of the un-caused cause” guys call it. apothewhatly.)
LikeLike
I will be sorry to see the Diedrich Cappucino go – really the best thing on the menu! Aside from that, it’s a sad day to see even MORE Starbucks take over.
Panera Bread has some good chow and the coffee is better then Starbucks – bon appetit!
LikeLike
AND SO IT ENDS
so now i have NOWHERE to perform.
bye bye, Carlos. you were a glorious anamoly.
LikeLike
Re: AND SO IT ENDS
Don’t say nowhere. Carlos is a force beyond time and space. Like a huge and inscrutable sex toy, he will return and he will be made to fit.
LikeLike
A New Diedrich Forum
If you to learn more information about this company, come visit us at here:
http://groups.yahoo.com/group/diedrichforum/
To answer another poster’s question, Gloria Jean’s in Australia is separate. Selling the Australia franchise was Diedrich’s biggest mistake in my opinion, but it was certainly wasn’t the only mistake by any measure.
LikeLike
Re: A New Diedrich Forum
I actually linked to that Yahoo! forum in an earlier post.
I didn’t know that Diedrich had owned the Australian franchise; for some reason I thought that was separate before they acquired Gloria Jean’s.
LikeLike