The Fall of Caribou Coffee

October 26th, 2014

Katelyn Mistele

Economic A4

Reuter

The Fall of Caribou Coffee

Next time you want to indulge in a caribou coffee house blend served directly to your car from the drive through window, or you want to treat yourself to a specialty drink, maybe the s’mores white chocolate mocha, think again. Caribou Coffee closed 80 of their locations last May, and decided to rebrand 88 other stores within the next 18 months. If you want to get your Caribou fix, you may need to travel to great lengths because of the recent downsizing of the company. This downsizing however, was the most economically wise decision as Caribou was no longer able to compete with top coffee market competitors.

In 2012, Caribou Coffee was bought out for $340 million by a private German company which happens to also own Peet's Coffee and Tea. In the best interest of the Caribou brand, and the ability for long term growth, it was decided that over 160 stores would either be cut or rebranded to Peet’s Coffee. This decision affected 26% of Caribou’s underperforming stores.

Caribou Coffee has always been a unique brand but never could keep up with other coffee suppliers, and never came close to competing with the biggest supplier of all: Starbucks. Starbuck’s controls most of the coffee market operating in many states nationwide, but the market still runs virtually laissez-faire. Starbuck’s brand yet that is on it’s way to potentially someday becoming a monopoly but there are many other coffee supplies that still have a big presence in the US. Other coffee brand’s may look to Caribou however, and choose to do the same thing and downsize their companies.

Caribou coffee now still owns 468 locations that are open and operating, and these are centered mostly in Minnesota, in the Minneapolis regions. Other states that still have Caribou include, North and South Dakota, Iowa, Western Wisconsin, Kansas, North Carolina, Colorado, and is still present in ten markets internationally. So, no fear, Caribou’s brand is not dying yet! By downsizing Caribou was able to compete and control smaller markets, like in Minneapolis where they virtually run the coffee market.

But the demand for Caribou Coffee has not diminished. Consumers took the closing of locations to heart, especially those in Illinois. Illinois used to be home to 60 Caribou Coffee locations which are all no longer under the same brand, and consumers are angry because they favorite coffee drink is now scarce and only available in certain states, Illinois not being one of them. Consumers also took the downsizing of the company to social media, where they complained about the closing of their favorite coffee store. Other consumers were angry at the short notice the company gave because they still had gift cards they needed to use. The supply of Caribou may have shifted westward, from the original midwest stores, but the goods online are still and will continue to be highly available and accessible to those consumers with gift cards.

So was rebranding and downsizing Caribou a good idea? Personally, I think it is a good idea in a sense that Starbuck’s owns most of the market. How can a company compete with Starbucks generates annual a great growth percentage revenue wise, and in operating income?

They can’t. I however, did enjoy Caribou more so than Starbucks, and I still believe that the company benefitted by selling their company. As well I think the private new ownership was wise in the new approaches to the business because Caribou can not longer compete with top stores, but Peet’s does have a chance as it was super popular in the west and they did slow their store growth for some time to focus on the quality of their company, so hopefully the infusion of stores nationwide will begin to defeat the reign of Starbucks.

Caribou isn’t gone! In fact there are still store operating in western Wisconsin. It was a sad day when over 160 stores were no longer the familiar Caribou brand, but it was an economically wise decision to do so.

Bibliography

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