Peets Is Perking

Peets Coffee & Tea may not be among the technology elite, but it has managed to do something most optical component wizards, consultants and wireless network hotshots have not — complete an IPO in 2001. What Peets Coffee & Tea can also do is demonstrate how to use the Internet to complement the other channels it uses to market and distribute products to customers.

Peets Coffee & Tea raised $17 million through the sale of 3.3 million shares in January. The shares spiked to $17.75 each and have since fallen to about $9 — $1 above the offering price. Not the greatest IPO showing, but the only technology stocks that have run the IPO gauntlet this year have been Agere Systems, Lucent Technologies shriveled offspring; KPMG Consulting, a spin-off from big accounting firm KPMG International; Loudcloud, the company Marc Andreessen founded after selling Netscape Communications; and Riverstone Networks, a spin-off from Cabletron Systems. All have been below their opening-day prices, though Agere and Riverstone have climbed back over.

Tech companies might envy Peets Coffee & Teas 17.5 percent growth in sales, to $24 million, and $400,000 profit for the last quarter of 2000, compared with a $200,000 loss the year before. For the year, sales were up 22 percent, to $84 million, while losses totaled $2.3 million.

Sales over the Internet are doubling, and now represent 26 percent of Peets Coffee & Teas direct sales volume, says Chris Mottern, president and CEO of the company. “It is getting to be a large number, and could be $4 million to $5 million for the full year this year,” he adds. That compares with $150,000 in 1997, $500,000 in 1998, about $1.2 million in 1999 and $2.6 million last year.

Peets Coffee & Tea promotes Internet ordering in all of its 59 stores, its direct-mail order business, e-mail marketing and other programs. Mottern says Net sales and mail order are the two most profitable channels for the company. Peets Coffee & Tea has invested in a new Web site architecture and information system to boost its online efforts.

In addition to its own Web site, Peets Coffee & Tea distributes through America Online and Webvan Group.

The Web site is hosted at AboveNet Communications with a dedicated T1 (1.5-megabit-per-second) link to the roasting plant, and is supported by a DSL backup. Data is copied to the roasting plant hourly, and orders accumulated during the day are included with roasting orders for mail orders, wholesale and the stores. Coffee is roasted in the morning and shipped the same day. Unlike wine, there are no state limitations on shipping coffee, and Peets Coffee & Tea ships to 33 countries. Since fresh coffee is a staple — even a necessity — for many, customers are often on a set buying schedule.

“Coffee is a great product to sell over the Internet,” Mottern says. “People need it every day, and we can assure its delivery.”

If only Cisco Systems could say the same for routers and switches.