Starbucks to Buy Rival Seattle Coffee Brands for $72 Million

Starbucks Corp. said Wednesday it will buy rival Seattle Coffee Co.’s operations in most of the U.S. and Canada for $72 million. The move is expected to boost the leading coffee chain’s grocery and food-service business and give it a less expensive line to market alongside the flagship brand.

Starbucks, with more than 6,000 retail locations in North America and abroad, picks up about 150 additional stores with the acquisition of Seattle Coffee’s two lines: Seattle’s Best Coffee and Torrefazione Italia, an upscale specialty brand.

Industry experts said the deal with Seattle Coffee’s Atlanta-based parent, AFC Enterprises Inc., which also owns Popeyes Chicken & Biscuits, does not greatly alter the landscape in the $6.8-billion cafe business. The market, with 13,500 cafes in the U.S., is marked by one huge chain, a few smaller ones and thousands of one-store outlets.

“In spite of Starbucks’ size, there are still a lot of independents in the marketplace,” said Ted Lingle, executive director of the Long Beach-based Specialty Coffee Assn.

More significant to Starbucks than the slight increase in the number of its retail stores, analysts said, is the increased access to customers at grocery stores and other companies’ food-service outlets, including fast-food restaurants.

“This is a wholesale deal,” said John Glass, a restaurant analyst with Boston-based CIBC World Markets. “They get a second brand of coffee [Seattle’s Best] which allows them to employ different pricing schemes.”

Seattle Coffee sells whole bean and ground coffee in more than 5,000 grocery stores and up to 7,000 other food-service outlets, from cruise ships to college campuses. That’s about half the 24,000 stores and food- service outlets offering Starbucks coffee.

Shares of Starbucks closed down $1.01 at $25.73 on Wednesday, while AFC gained 52 cents to close at $15.24, both on Nasdaq.