Tully’s buyer Green Mountain looking for larger space to roast coffee
While Tully’s Coffee figures out how much cash shareholders will receive now that it has sold its wholesale operation, buyer Green Mountain Coffee Roasters is shopping for a bigger space between South Seattle and Olympia.
Green Mountain plans to move its roasting machines and about 85 employees from the old Rainier Brewery building in Seattle, where Tully’s plans to keep its remaining 45 workers to oversee the retail business.
On Friday, Green Mountain paid $40.3 million for the wholesale business of Tully’s, which changed its corporate name to TC Global. Tully’s will still operate its roughly 170 retail stores, including two that it opened in Singapore last year in partnership with another company.
“We’ve not made a final determination” about a cash distribution for shareholders, Chairman Tom O’Keefe said during a news conference Monday morning. The board will meet to determine that “in the next few weeks.”
About $26 million is going to repay Tully’s debt, and an undisclosed sum will help revitalize its retail operation, including adding about 200 shops over the next 12 to 18 months.
Green Mountain plans to make the Puget Sound area its third coffee-roasting and -distribution base, in addition to its home state of Vermont and a new 334,000-square-foot facility in Tennessee.
But it needs more than the 80,000 square feet that Tully’s occupies in the old Rainier Brewery, CEO Larry Blanford said Monday.
“It’s a great, historic location, [but] it’s just not conducive to supporting the growth we need,” Blanford said of the colorful old brick edifice beside Interstate 5 with the giant neon “T” atop it.
Green Mountain wants to move by this fall into a space with at least 120,000 square feet and room for expansion. In the next couple of years, it expects to need 200,000 square feet and an additional 40 to 80 employees, said Chief Operating Officer Scott McCreary.
Green Mountain plans to sell its light-to-medium roast in more Western U.S. stores and push the darker Tully’s roast farther east. Currently, Tully’s is not sold in grocery stores east of Chicago.
The new Seattle-area facility will also roast Newman’s Own coffee, which Green Mountain is licensed to distribute. In the Northeast, it sells a co-branded Green Mountain/Newman’s Own blend to 650 McDonald’s stores.
Unlike many coffee companies, Green Mountain does not have a chain of retail stores. Its primary businesses are whole-bean coffee and Keurig single-cup coffee brewers and the single-serve coffee cups that go in them.
Green Mountain, bought and built by Bob Stiller after he made a fortune in the tobacco rolling-paper business, has been one of the best-performing companies in the coffee industry and on Wall Street during the economic downturn.
Its profit rose 74 percent to $22 million last year, and its stock hit a new 52-week trading high of $50.49 last week.
Mark Pendergrast, an author who has written about Coca-Cola and the history and business of coffee, says Green Mountain could become the runner-up to Starbucks in the specialty-coffee category.
Although Starbucks “overexpanded and was overconfident, it’s almost impossible to destroy a brand once it is the first mover in the category,” said Pendergrast, who lives in Vermont.
“Coke has Pepsi, but Starbucks doesn’t really have a Pepsi,” he said. “There’s no runner-up in terms of specialty coffee. Now, Green Mountain in my backyard is doing so well, maybe they are going to be the runner-up.”
Source: http://seattletimes.nwsource.com/html/businesstechnology/2008951859_tullys31.html
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