When Peet’s Coffee decided to grow its brand beyond California a couple of years ago, chief executive Dave Burwick looked eastward and liked what he saw.
Burwick, 54, knows the District. He was married here. His in-laws live here. And now, his son goes to school here at George Washington University.
So Burwick knew it was fertile ground for “Peetniks,” as the bean purveyor’s cult followers are known in their home state of California. The city had just the right mix, he thought, to make the Peet’s magic take off.
The question is whether Peet’s can be successful when Starbucks — like it does most everywhere — leads the Washington-area market by a mile.
Burwick said the D.C. market is ripe for his brand, adding that he doesn’t need to take share away from Starbucks to be successful.
“We’re very careful about where we go,” said Burwick, who cut his teeth in the beverage business during a decade at PepsiCo, where one of his accomplishments was building the Mountain Dew brand (one of my personal favorites). “We want to be in the right geographies, in the right [grocery] chains, where people are willing to pay that premium and where there are people . . . who really appreciate coffee. We don’t want to be everywhere.”
The company learned its lesson on demographics early on when it aggressively added retail cafes in Ohio, Michigan and Pennsylvania after converting them from Caribou Cafes.
“If we’d done more homework, we would have maybe passed on converting those stores and we would have focused immediately on places like D.C. and Boston and Chicago,” Burwick said.
Those are cities weighted with the young, upscale urban professionals that are one of the sweet spots for Peet’s. They are college-educated folks who tend to watch what they put in their mouths and are willing to spend extra for it.
“The D.C. demographic base and psychographic base is very similar to the Bay Area,” Burwick said. “We sell lots of beans in grocery stores in the D.C. area.”
The fact that Washington also has a large base of transplanted Californians made its metropolitan area an even juicier target for growing the Peet’s brand.
The company dates back 50 years to a Dutch business executive named Alfred Peet, who was early to the artisan coffee craze that gave rise to Starbucks and hundreds of caffeine boutiques.
Back then, Peet introduced the European tradition of fresh, deep-roasted coffee to a country that often got its caffeine fix in cans, often freeze-dried.
“You have this conservative, Calvinist Dutchman who shows up in Berkeley in the midst of student radicalism,” Burwick said. “He changed the way Americans think about coffee.”
Peet arrived at the beginnings of the foodie revolution, when Alice Waters began preaching the verities of organic food. That’s part of the brand appeal for Peet’s, and it didn’t come cheap.
“We sell for more than $1 a bag above Starbucks’ price,” Burwick said.
Peet’s was a publicly traded company for a dozen years before being bought in 2012 by JAB Holding Company, a privately held Luxembourg firm that invests in consumer brands. JAB hired Burwick in January 2013 from Weight Watchers International, where he was president of North American operations.
Since then, Peet’s has planted 21 stores in the District, Maryland and Northern Virginia. The company plans to open another store, in Georgetown, next month.
Peet’s also signed a sponsorship deal with the Washington Nationals, where its sign graces the outfield and a Peet’s kiosk caffeinates the crowd at Nationals Park.
Those stores that have opened in the past year and a half in the Washington area have grown sales annually by 10 to 20 percent. “We think we could have 30 to 40 stores in D.C.,” Burwick said.
The arrival of Peet’s cafes has begun what Burwick calls a “virtuous circle” of sales. The 21 cafes have driven consumer traffic to its section of the shelf at the grocery stores in the region, where Burwick said business has grown from a 10 percent share in the Washington premium coffee market to more than 14 percent.
“When you’re in a cafe,” he said, “it benefits the grocery. In a grocery, it benefits the cafe.”
The company has also expanded its presence to office buildings, where it sells wholesale beans that are brewed and offered in places such as Johns Hopkins Bayview Medical Center.
The Peet’s stores in D.C. pushed past the threshold of $1 million in annual sales in their first year, a “big deal,” Burwick said.
Peet’s did its due diligence before it went in search of Washington Peetniks. It visited with eight members of California’s congressional delegation — including Sen. Dianne Feinstein and Reps. Darrell Issa, Nancy Pelosi, Jackie Speier and Barbara Lee — to drum up excitement and encourage staff members to quaff a Peet’s beverage. They even staged a barista night and tasting events.
The company has spent some time trying to find out how many people touch its brand every year. The answer: “a lot.”
Burwick said Peet’s serves about 2 billion cups of coffee nationally through retail stores, coffee shops, grocery stores and cups brewed at home from Peet’s beans.
About 5 percent, or 1 in 20 households, bought coffee beans from Peet’s last year in grocery stores. Burwick sees his mission as reaching the other 95 percent.
When it comes to Washington, coffee and fast food are the only categories where millennials outspend their elders. Within a given week, according to one report, 44 percent of 18- to 24-year-olds and fully half of 25- to 39-year-olds drank espresso-based beverages.
Fifty-seven percent of Americans over age 18 drink coffee on a given day, and a quarter of adults say they are addicted to the beverage (me included).
Peet’s is no Starbucks.
The upstart has doubled revenue in the past four years, but its sales are under $1 billion a year, compared with Starbucks’ $20 billion.
“The long-term strategy is to be the most admired coffee brand in America,” Burwick said.
As far as increasing consumption, he definitely is doing his part. “I have a cup of coffee when I get up in the morning at home with my wife,” he said. “My wife likes eastern African coffee, so we drink Ethiopian and Ethiopian Fancy.”
Then, when he gets to the office, he has a second and third cup through the morning. Sometimes Burwick adds a fourth in the afternoon, depending on his mood and what he is doing.
“At the office,” he said, “it depends. Today, it was Guatemala. The other day, it was Sumatra.”