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How Peet's Starbucked Itself

The iconic East Bay company that pioneered gourmet coffee with a small business ethos has grown increasingly like its mega-chain offspring.



The morning rush at the Peet's on Lakeshore Avenue in Oakland is, in a word, insane. It's said to be the highest-transaction outlet in the company's growing empire, and it's a sight to behold: Starting around 7:30 or 8 every weekday, the line snakes through the narrow store, thick with parents and young children, college students, bleary-eyed commuters, and blazered office-goers anxiously chatting on cellphones over the din. On the other side of the register, a small group of harried workers rush to fill everyone's order — or, at the very least, manage the chaos. At the espresso bar, a young woman glances up at the computer screen above her as it blinks from blue to red with each passing minute, a visual reminder of the importance of speed and corporate control. A single drop of sweat rolls cinematically down her brow.

This is Peet's Coffee & Tea, circa 2011: successful, efficient, and, many say, losing its edge and its ethos as it continues to compete in an increasingly crowded market. Once a small business known for its relaxed vibe and killer beans, Peet's is a now a company where baristas are timed as they make drinks and dinged if they take too long; where secret shoppers watch whether employees are sticking to the corporate sales pitch; where the workforce is increasingly overworked, underpaid, injured on the job, burned out, and plagued by turnover. It is, in other words, a far cry from what it once was: the North Berkeley neighborhood coffee shop that brought craftsmanship and superior beans to the United States.

"They've lost the energy and passion as they've grown," noted Miles Small, editor of the trade publication Coffee Talk, based outside Seattle. "I think the bigger they get, the more distance they put between them and their founding philosophy."

In many ways, Peet's appears to be a victim of its own success: It was, after all, founder Alfred Peet who personally trained the entrepreneurs who founded Starbucks, now one of the largest companies in the world. He also paved the way for a new group of small specialty coffee roasters, many of whom took inspiration, either directly or indirectly, from his philosophy and who now threaten to siphon off Peet's' former demographic of coffee aficionados.

And it was only because of Peet's' initial popularity that the company ever had the chance to expand into the behemoth it is now. "As soon as Peet's became the universal benchmark for what specialty coffee could be, it started to attract interest from people wanting to buy stock," Small explained. In 2001, when the company went public, and shares rose 17 percent on its first day of trading, it was a clear sign of not only the company's popularity, but also what was to come: "That was the defining moment for Peet's," Small noted. "At that point, they had no choice: They had to grow or die."

And grow they did. There are now Peet's coffee outlets all across the country — in Cambridge, Massachusetts and Chicago, Illinois; in airports and malls and hotel lobbies and BART stations. At press time, Peet's was operating a total of 191 stores across North America; just last week, the company announced that it would be opening a new location on College and Alcatraz avenues in Berkeley. Last month, analysts at the firm Baird Equity Research estimated that the company will rake in $372 million in revenue this fiscal year; meanwhile, last quarter, Peet's recorded a 12 percent revenue increase over the corresponding period last year, according to a company press release.

But somewhere along the road to hundreds of millions of dollars in annual revenue and ubiquitous lattes, the company that began as a small, locally-oriented coffee shop with a commitment to quality and corporate responsibility has, in many ways, come to be none of those things.

"They no longer fill that high-quality need any more — they serve the masses," noted Iulia Bodeanu, who worked at three different Northern California Peet's stores before leaving for another job earlier this year. "It's no longer: 'This is where you get the best cup of coffee.'"

It's not a stretch to say that Alfred Peet started a revolution when he opened his first coffee shop on the corner of Vine and Walnut streets in Berkeley in 1966. "Most people in the world — and even most people in the coffee industry — don't realize the contribution that Alfred Peet made to coffee and to specialty coffee," Small said. "He was crucial."

Born in Holland in 1920, Peet was raised in the coffee trade and worked for the Lipton Company in London after World War II before moving to San Francisco to work for a coffee importer. Here, he was shocked to discover the poor quality of coffee Americans were drinking and quickly made it his life's mission to bring better coffee to the United States.

The signature Peet's style was made in small batches, with high-quality beans and in the company's trademark super-dark roast. It was also known for an unusual (at least for the time) attention paid to the growing process. "He was really the first person to acknowledge and praise these growers that were trying to make a quality product," Small noted. "As a roaster, he roasted with care because he appreciated the difficulty of growing coffee, and he roasted coffee with a passion that he felt the growers deserved."