Starbucks Buys a Bakery
Starbucks has the coffee thing down pretty good, but food — not so much. Now, it appears as though that is going to change — and watch out Panera Bread.
The coffee giant announced yesterday that it has entered into a definitive agreement to acquire Bay Bread, LLC, operator of the 19-store La Boulange bakery chain.
Starbucks also hired Pascal Rigo, French baker and founder of La Boulange, to run the bakery business which also sells its products in upscale restaurants, hotels and specialty grocery stores in addition to its own locations.
The goal over time is for Starbucks to sell La Boulange products in its stores while also growing the bakery chain beyond its San Francisco Bay area home.
"After more than 40 years, we will be able to say that we are bakers too," said Howard Schultz, Starbucks chairman, president and ceo, in a press release. "In La Boulange bakery and Pascal, we’ve found a company and a culinary artist who share our passion for creating premium products, reinventing and elevating an entire product category, and delivering the best customer experience."
Food currently represents about 19 percent of Starbucks’ total business and has been growing at double digit rates in recent years, according to the company.
"The acquisition of La Boulange bakery will help us to expand day-parts, drive customer loyalty and ultimately grow the overall business through differentiated brand experiences and multiple channels," said Cliff Burrows, president, Starbucks Americas. "We will leverage our scale and premium product expertise to transform a core part of our business while building La Boulange bakery into a national artisanal bakery brand."
"La Boulange believes in whole foods made from the freshest ingredients, including specialty grain, European-style butter and locally sourced produce," said Mr. Rigo. "We weigh, mix, divide, roll, cut, bake and care about every croissant, cookie, pastry, loaf and bread that goes in our pastry case and we are looking forward to sharing our passion with Starbucks loyal and discerning customers."
Jeff DeGraff, a management professor at University of Michigan’s Ross School of Business, told USA Today, the deal "makes perfect sense. Starbucks has to have a premium pastry product to go with its coffee if it wants to occupy the premium cafe space."
- Starbucks Announces Agreement to Acquire La Boulange Bakery to Elevate Core Food Offerings and Build Premium, Artisanal Bakery Brand – Starbucks Corporation
- Starbucks buys San Francisco bakery chain for $100 million – USA Today
- Starbucks buying San Francisco bakery – Reuters
- Starbucks buys bakery to improve food offerings – The Associated Press/San Francisco Chronicle
Discussion Questions: What do you think of Starbucks’ planned acquisition of La Boulange Bakery? Do you agree that Starbucks needs a premium pastry product to go with its coffee? What do you see as the key challenges and opportunities of running the La Boulange chain?