As Peet’s Coffee Parent Shares Surge Post IPO, Expect It To Be A Bigger Contender Against Starbucks

The coronavirus pandemic may have shut restaurants and cafes, but it’s not quenched the thirst for coffee: shares of Peet’s Coffee parent JDE Peet’s surged 14% on Friday after an initial public offering, likely paving the way for Peet’s to be a bigger challenger against coffee house giant Starbucks SBUX .

With the IPO, JDE Peet’s, formed only after a December deal that combined Peet’s Coffee with European packaged-coffee giant JDE, is valued with a market cap of about $17 billion, in what’s reportedly Europe’s biggest initial public offering this year. 

The company is majority owned by the German family-owned investment group JAB, which also has majority stakes in fast-casual restaurant chain Pret A Manger, donut house Krispy Kreme and soft drink giant Keurig Dr Pepper. 

Even though Peet’s Coffee, founded in Berkeley, California, represented only about 13% of JDE Peet’s about $7.6 billion in group revenue last year, the importance of Peet’s as a key growth driver against Starbucks and other rivals is evident.

Describing Peet’s as one of its “global jewels,” the company said in the IPO filing that it’s “increasing the household penetration of Peet's in the United States through various routes-to- market.” Peet’s will expand its consumer packaged coffee business in the U.S., the world’s largest coffee market, by “leveraging off its Peet's coffee stores” in the U.S. and through its online sales, including that with Amazon AMZN . 

Peet’s sales have risen an annual average of 14% since fiscal 2012, more than doubling its revenue to $983 million in fiscal 2019, according to the filing. Its U.S. household penetration has increased to 5.5% from 3.6% in the past five years.

“There’s still significant opportunity to further increase” that penetration, the company said in the prospectus, adding Peet’s share in the U.S. “premium coffee category” market has risen to 9.9% from 7.7% over that time. 

Don’t forget JDE Peet’s also counts artisanal coffee houses Intelligentsia and Stumptown among its 50-plus brands globally. Its other labels include Jacobs Coffee, Douwe Egberts, Senseo and Tassimo. 

To be sure, Peet’s coffeehouse presence is still small compared with that of Starbucks. In the U.S., Starbucks had grown its specialty coffee and tea shop market share to nearly 68.3% in 2019, up from 60.5% in 2013, while Peet’s, at No. 2, saw its share dip to 1.1%, from 1.4%, according to Euromonitor. Meanwhile, on the packaged goods side, the company contends with global giant Nestlé, which has the Starbucks packaged coffee license. 

Indeed, the filing lists Nestlé and Starbucks as the company’s two largest competitors in the global coffee market.

With data showing continued global thirst for that cup of Joe even with the pandemic shutting brick-and-mortar locations, JDE Peet’s as a public company will no doubt heat up an already brewing coffee war.