"This is the coffee source," Baldwin said as he greeted customers from behind the counter of the original store.
Forty years after its birth, Peet's still does coffee better than most competitors, primarily because its people still roast beans by hand, modulating the heat and brewing a sample from each batch to taste it, Davids said. Rivals either use computer-managed roasting formulas or overcook the beans, he said.
For The Record
Los Angeles Times Thursday June 22, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 43 words Type of Material: Correction
Peet's Coffee: A chart of coffeehouse chains accompanying an article about Peet's Coffee & Tea Inc. in Business on June 11 omitted It's a Grind Coffee House. The Long Beach-based chain has 86 locations, which would have ranked it eighth on the list.
Inside the Peet's 103,000-square-foot roasting plant and headquarters in nearby Emeryville, John Weaver stands next to what looks like a giant drum-shaped clothes dryer. Large blades turn 800 pounds of Peet's House Blend beans, allowing the batch to roast evenly as the heat climbs to 400 degrees.
About a dozen times through the 12-minute cycle, Weaver opens a small door and pulls out a scoop.
The master roaster uses nearly every sense to judge when the beans are done. He watches as their color turns from green to brown. He listens to the accelerating pops that come from the roaster as gases and steam escape. He sniffs for caramelizing sugars in the fruit.
"I am always making small adjustments," Weaver said.
When the coffee is ready, Weaver opens the roaster's door and thousands of steaming, crackling chocolate-brown beans cascade onto the cooling turntable. A wave of heat, accompanied by a slight burnt caramel aroma, sweeps across the floor.
Later, Weaver will move to the tasting room, where he will brew a cup to sample how the batch turned out.
"It all comes down to purchasing the right beans," said coffee consultant Willem Boot of Mill Valley, Calif. "And Peet's focuses on getting very high-quality beans from growers."
That's the job of Welsh, the coffee chief, and his international network of brokers. Only 380,000 pounds of the Choco beans are available, a small proportion of what Peet's sells annually. But Welsh is tempted to take the entire crop.
At the Emeryville plant, Peet's roasts 35,000 to 55,000 pounds of coffee a week, which isn't enough to sustain Peet's growth. To handle its expected bean boom, Peet's next year will open a $25-million, 135,000-square-foot coffee roasting and distribution facility a few miles away in Alameda.
Peet's financial results have been as hopped up as a double espresso. In 2005, Peet's net income grew 22% to $10.7 million. Sales rose 20% to $175.2 million.
However, the Peet's stock has declined 7.3% over the last year. But even after that drop, the market value of the company that started as a Berkeley storefront stands at $403 million.
Much of the growth has come with the general upswing in the specialty coffee industry, said Anton Brenner, an analyst with Roth Capital Partners in Newport Beach. But Peet's also benefits from being a roaster and seller of beans rather than solely an operator of coffee restaurants, he said.
Its beans are sold in more than 4,000 grocery stores, a number that grows monthly. Peet's lucrative direct-to-consumer home shipping service, which cuts store overhead and the expense of distributing to grocers, accounts for about 10% of the business.
A typical Peet's store takes in $1.3 million annually. About $600,000 comes from the sale of whole beans and related items. The remainder comes from beverages, pastries and other treats.
"They have captured part of the take-home market -- people who are turning away from commodity coffee," Brenner said. "Once you have tasted Peet's, you don't want to go back to Folgers."
Yet not every coffee expert is confident of Peet's future.
Boot and other consultants and coffee judges say that Peet's dark roast style is popular for now but could lose ground because of changing tastes.
"There's a growing consumer awareness that dark roast kills off flavor by caramelizing the sugars and burning off the oils in the beans," said Mark Prince, senior editor of CoffeeGeek.com.
Lighter, fruitier roasts have won the last four World Barista Championships -- an international tasting contest -- and are a trend in the United States, Prince said.
There would be no reason Peet's couldn't adapt by changing its roasting style, but it would be a wrenching change. "Dark roast is a philosophy since the inception of the company," Prince said. And although Alfred Peet hung up his roaster scoop decades ago, the culture that he fostered lives on.
Peet's is growing primarily through word of mouth, relying on its cadre of die-hard coffee lovers to promote the company to friends and relatives. It does virtually no advertising.
And though 100 of its stores -- more than 4 of every 5 -- are in California, this network has international reach.
Craig Hendricks starts his day with Peet's, a morning that arrives 11 hours earlier than in the coffee company's home territory. Hendricks is a civilian intelligence advisor to U.S. military forces in Baghdad. He carried Peet's as a National Guardsman in the Balkans. In an e-mail from Iraq, Hendricks described "the fragrant aroma gently rising in the steam from my little press pot." Peet's, he said, has become a daily reminder of his family and friends at home in San Diego.
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Largest coffeehouse chains in the United States by number of stores, first quarter 2006
Starbucks: 8,000
Caribou Coffee: 322
Tim Horton's: 292
Coffee Bean & Tea Leaf : 213
Coffee Beanery: 200
Seattle's Best*: 160
Peet's Coffee: 112
Tully's: 100
Dunn Bros. Coffee: 85
Port City Java: 55
*Subsidiary of Starbucks
Source: Datamonitor
