Perfect Blend: Home Savings, Diedrich Coffee : COFFEE: Getting Cash . . . but There’s a Klatch

Sip a cup of hot java, open a checking account. Lull over a latte, mull a mutual fund. That’s what Home Savings of America and Diedrich Coffee Inc. have in mind, anyway.

The Irwindale thrift and the Irvine-based coffeehouse operator are joining forces in what could be the oddest concept yet to emerge from the trend of putting java joints in just about any setting that generates foot traffic.

Airports, department stores and booksellers have caught coffee fever. Now Home Savings plans to open three Diedrich shops inside branches in the Los Angeles area starting in May. If the idea works, the savings and loan will roll out more coffee shops throughout its 391-branch system.

The two companies also plan to put ATM machines in Diedrich’s 47 existing locations, and will cross-promote products, such as offering free coffee to thrift customers and marketing packages of financial services to coffee drinkers.

This may be the ‘90s version of the toaster giveaway, but executives say the idea is driven largely by real estate considerations. Diedrich wants to set up shop in prime downtown and suburban locations, while Home Savings needs to pull more customers into its branches in the face of industry consolidation.

“There’s so much of a win-win with Diedrich and our customers,” said Carl Forsythe, executive vice president of personal financial services for Home Savings. “We’ve got nothing to lose here.”

Steven A. Lupinacci, Diedrich’s president and chief executive, said that finding a good location is one of the toughest challenges for specialty retailers. Diedrich currently has coffeehouses in a Sport Chalet store in Huntington Beach, a Barnes & Noble bookstore in Irvine, and a computer superstore in Dallas.

The Home Savings branches “are beautiful buildings located in some prime real estate downtown neighborhoods,” he said. “There really isn’t any other retail space to be had there. Plus, I think the customer is compatible.”

The Home Savings alliance also marks the latest twist in the growing trend of blending financial services with retailing. Bank branches have been popping up in supermarkets. Glendale Federal Bank will soon open what it says will be the first of several new branches inside Kinko’s copy stores in California.

But some analysts think that combining a thrift branch with a coffeehouse is a stretch.

“Bank and brew? Cash and coffee? I don’t get it,” said thrift industry analyst Charlotte Chamberlain at Wedbush Morgan Securities. “If the answer [for Home Savings] is a coffeehouse, what is the question?”

For Diedrich, however, the plan “makes some sense,” provided the bank branch is in a strong location, said Andrew M. Barish, a restaurant industry analyst at Robertson, Stephens & Co.

And the coffeehouse industry’s fast growth hasn’t ground down yet, he said. He believes the number of locations could easily double over the next four to five years, to 10,000 nationwide.

Diedrich is still small, with $158,390 in profit on sales of $14 million in its latest nine-month period. But among a coffee klatch of rivals vying to be the Avis to Starbucks’ Hertz, Diedrich could emerge the winner, Barish believes.

The agreement with Home Savings calls for the thrift to set aside 1,200 to 2,000 square feet at each of the yet-to-be-determined branches for the coffeehouses. The thrift will lease the spaces to Diedrich, providing Home Savings with some rental income.

Diedrich won’t rely just on bank traffic, Lupinacci said. The coffeehouses will have two entrances--one from the bank, the other from the street. The cappuccino crowd would have access before and after banking hours.

For Home Savings, the move is also part of a calculated marketing strategy designed to distinguish it from the big commercial banks that have been de-emphasizing their branches in favor of banking by telephone, automated teller machines and supermarkets.

Home Savings, a subsidiary of H.F. Ahmanson & Co., has assets of more than $50 billion and is one of the nation’s largest savings and loans. But it and a few other thrifts such as Glendale Federal have been promoting themselves as community banks that still offer customers a personal touch.

“Home Savings has made a big commitment not to downsize that much,” Forsythe said. “Our customers still want branches to go to.

“What we want to do is make them more efficient. Either you make them smaller, or draw more people in.”

Forsythe envisions eventually breaking down most of the barriers between the thrift branches and the coffee shops. They’d have the same comfortable, artsy decor. Customers would sit at homey wood tables and nurse their hot joe while discussing certificates of deposit with a financial advisor.

He said he might even extend the savings and loan’s hours to cash in on the early-morning, late-night and weekend crowds that typically haunt coffee shops. If it works, Forsythe sees extending the concept to include a bagel shop or possibly a small bookstore.

“If it doesn’t work,” he said, “we can chalk it up to learning about how to manage external relationships with vendors.”