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
"Caribou Coffee: A Growth Stock Putting Up Results." - Caribou Coffee Company, Inc. (NASDAQ:CBOU). N.p., n.d. Web. 27 Oct. 2014. <http://seekingalpha.com/article/296618-caribou-coffee-a-growth-stock-putting-up-results>.
Kavanagh, Jim, and Amanda Hobor. "Caribou Coffee to close 80 stores, rebrand 88 others." CNN. Cable News Network, 9 Apr. 2013. Web. 27 Oct. 2014. <http://edition.cnn.com/2013/04/08/business/caribou-coffee-closings/>.
I agree that the downsizing was a good idea especially when competing with Starbuck. Starbucks has built themselves into the leading coffee brand and it is hard and nearly impossible for a lot of other coffee companies to compete with them. Then again, (I am not completely up to date with my coffee brands and stores) I feel like Caribou Coffee is still a large coffee company and at least from what I'v heard from reviews and even just friends, Caribou seems like it could compete with Starbucks.
ReplyDeleteI guess I didn't really notice the closing and re branding of Caribou Coffee. But like you said I think this is a very economically smart move by the company. I think with the less stores will create a larger demand for the products because they are becoming scarce. Even though Caribou Coffee doesn't have as large of a following as Starbucks, they are still have a following and with the closing of the stores, I do think that people will seek out Caribou Coffee for their needs instead of going to a Starbucks or any other coffee company.
ReplyDeleteThis was a good piece. I noticed myself that the Caribou Coffee on Silvernail changed to Peets Coffee. I didn't think anything of it at first but now I understand that Caribou is struggling in the market. I wonder if the re-branding of the shop on Silvernail will increase its business.
ReplyDeleteI completely agree with the fact that it was economically a good idea for Caribou Coffee to downsize, because like Macauley said, the demand for their product is going to be a lot higher than it was before.
ReplyDeleteAlthough I'm sad that Caribou did downsize, I agree it was the best economic decision. I'm curious as to why Starbucks is so much more successful then Caribou, because personally, I prefer Caribou coffee over Starbucks. I suppose Starbucks just has that brand name that everyone knows and respects, hopefully one day Caribou can build back up again and bring their company back to the locations that miss it!
ReplyDeleteKatelyn, I noticed the other day that Caribou is now Peet's. This is effecting our local store. Hopefully this will be an improvement for the company. I think that focusing on a smaller market is a good idea because there is less competition and more opportunity for them to dominate the market. If they focus on Minnesota and surrounding areas they have a stronger chance then if they expand and try to compete with Starbucks and other large coffee companies. Staying small and local should make them a novelty and allow them to compete. How did Starbucks become so powerful?
ReplyDeleteThis article was very interesting to me since I have just started to get into coffee drinking. I can't say that I've ever had Caribou but from what you said it sounds wonderful. I am just a little Kuerig user. Anyway, I agree that it was the right decision to downsize because they just couldn't compete with companies like Starbucks. But for real though, shutout to Starbucks because they are killin' it right now.
ReplyDeleteAs you said before, Caribou Coffee closing down a large amount of their stores was economically a wise decision, seeing how popular Starbucks is. It’s hard to compete with such a demanding company, that has ultimately taken over the nation’s coffee market. So Caribou’s move to downsize their company benefited them completely, because it opened up the eyes of the consumers that truly want their products, seeing as how scarce their locations are now. And now that they were bought out by Peet’s, maybe there is a chance that this company can finally start to compare to Starbucks, and create a competitor in the coffee market. Overall this was a good decision economically, and hopefully the still standing Caribou Coffee’s can continue to succeed and bring happiness to its customers. Great job on this blog post!
ReplyDeleteI've never heard of caribou but maybe this is what it needed. It needs publicity from bloggers like ourselves and people being mad on the internet. Maybe it will spread and maybe more people will hear its names because it went under and has seemingly better coffee than Starbucks. I do think it was a great idea, make money, make more money after.
ReplyDeleteI was really happy to find that you wrote an article on this topic because Caribou was my favorite coffee shop and when I drove past it on Silvernail to find it closed I was in shock, like many of their customers, because they really gave no warning. I don't know much about Peet's Coffee because there wasn't any previously in Wisconsin, but if a reputable and familiar coffee chain like Caribou wasn't doing well, a brand new unfamiliar brand might scare away previous customers and help Starbucks gain a total monopoly over the coffee business.
ReplyDeleteI was wondering why they get rid of Caribou! It was a sad day for me but good day for them apparently!
ReplyDeleteEconomically speaking, downsizing their stores was the smartest thing that Caribou could do. This was their market won’t be as spread out and difficult to manage. By decreasing the spread of their stores Caribou will be able to gain revenue from the cut of employee’s, store ownership, and supply cuts. In the long run this choice will instead help Caribou grow stronger as a company and may soon be able to re-open many more stores across the nation again.
ReplyDeleteThis just shows how powerfully companies like Starbucks impact the economy and other business. Starbucks is becoming a monopoly of its own and from your article I can see that it truly was in Caribou Coffee's best interest to shut down a majority of stores that were not bringing in the profits they had hoped. It was interesting to see how the recent downsize created more interest in their product since it is more scarce. I can agree that this was the wisest economic decision for the company. Overall this was an interesting article, so well done.
ReplyDeleteCool article that makes me really sad since I absolutely LOVE C.C.'s chocolate-covered coffee beans. Crunchy and chocolatey, a product with a flavor I couldn't (and still can't) find anywhere on the market with a better flavor. C.C. was a great company, and still is, but conglomerations like Starbucks are establishing concern about the state of coffee advertisement and distribution, especially at the ridiculous prices people continue to buy for either the flavor or mostly the brand, which in itself is ridiculous. I yearn for the younger days of the Coffee Giant industry, when pumpkin spice and white mocha were still unprecedented, new flavors. Maybe we'll get that again, but it would be a true shame if we could only have access to Starbucks and Peet's for the rest of our days.
ReplyDeleteThis is another interesting topic, and it is scary yet not too surprising that someday Starbucks could become a monopoly with all the attention it's getting. I have never been to caribou coffee personally but if selling some of their stores benefited, then I guess it was the best thing to do after all. And as shown in your charts, it does seem like most coffee shops are being diminished due to the competition from starbucks. I don't know what will come, but if starbucks does one day become the only of few successful coffee shops, then it was no surprise. Good topic and well done!
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ReplyDeleteI’m not gonna lie, I’m not an avid coffee drinker and I’m not a big fan of it. But this was a rather interesting article. With Starbucks gaining momentum, it wouldn’t be a shocker if the coffee business turns into a monopoly. But also, Caribou is still going strong, through downsizing have they lost some numbers, of course they have, but Caribou can still easily participate with starbucks in a monopolistic competition sort of sense. And so as stated before, I’m not a big fan of coffee but it sometimes is a little disheartening to see businesses shrink no matter what industry it is.
Although I am not a coffee drinker myself, it is still very obvious that Starbucks has taken over the coffee industry. Some may consider it almost a monopoly now a days. It was definitely a wise decision for Caribou to close down and sell for a pretty good price, and they even got to keep some stores open! It seems that they made the best out of an inevitable decision. Maybe the closing upset some customers, like in Illinois, but Caribou had the right idea to take the companies best economic interests into consideration.
ReplyDeleteThe closing of many Caribou Coffee's was a disappointment to many consumers, however an overall good economic decision. This is because there are a large amount of Starbucks stores scattered everywhere therefore, drawing customers away from Caribou Coffee Shops.By Caribou Coffee reducing their amount of locations, it will save them money to spend on the current stores they kept open. Overall reducing Caribous locations was a wise economic decision.
ReplyDeleteI may have not noticed the closing and re-branding of many Caribou Coffee's, but obviously many have. It is too bad that many people are upset with this change, but it sounds like there is only so much a company can do in order to be successful. Even though it may not be a good thing for some of the customer, it can be helpful to better define the brand to a more specific market by downsizing. This is a very interesting topic as there are other stores also going through similar situations and consumers just have to understand.
ReplyDeleteIs Starbucks creating a monopoly here by making very high barriers to entry in the coffee industry so no small competition, like caribou coffee, can enter and make a profit? They can overtake the coffee industry because anyone wanting to start a small coffee company would have to wait until they're almost as large as Starbucks to start seeing any profit.
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ReplyDeleteKatelyn- The success of starbucks probably should be more limited and not as dominant as a competitor. Is there are a possibility that there will be less Caribou or Pete’s Coffee in the United States and more in Europe as to target a different market because Starbucks is so strong in the US? I think that it would be a better idea to do this, that way you’re not necessarily avoiding the competition, but just moving to where the competition is weaker.
ReplyDeleteI have tried Caribou Coffee a couple of years ago and I really liked it. Unfortunately, at that time, I wasn't really into coffee. This past year I was willing to give coffee another try and went looking for the Caribou Coffee that I had original gone to. Only to found out that it had been re branded. I tried Peet’s Coffee and Tea but it wasn't as great as I remember Caribou’s coffee being. Although I am disappointed by the fact that I can’t get Caribou around my house, but I understand Caribou’s need to down size. Not only will the downsizing safe Caribou money if sales continue to drop, but it will also increase the demand for their product.
ReplyDeleteI agree with you in the fact that it was smart for Caribou to shut down a lot of their stores. Whenever I think of coffee, I think Starbucks. Sure, Caribou is a large company, but there was no way it was going to compete with Starbucks. I enjoyed looking at your map and I found it interesting that there were still so many Dunkin Donuts around, I thought a lot of those were shut down. Great post!
ReplyDeleteI personally am not much of a coffee drinker, however I know many people who have chosen Caribou Coffee over the more popular brands such as Starbucks. However even though the Caribou brand is thought to be more tasteful or better than the brand of Starbucks, unfortunately it comes down to the aspect of which is more branded and more well known which is Starbucks without a doubt. Although it probably is a let down for those who enjoy Caribou more so than other brands, especially the new Peet's Coffee and Tea, the downsizing should help save money for prior business and should really increase the demand of the product as well because it is more scarce than normal.
ReplyDeleteVery good point about how t was wise for caribou coffee to shut down some of their businesses. Starbucks is the most well know coffee brand, but some still prefer caribou coffee. A lot of people probably take in to account the price as well, considering that Starbucks is very expensive. Coffee is a must these days and it is very interesting to see how far people are willing to go to get the perfect coffee that they like or want.
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