Caribou Coffee Company Inc.
) recently entered into a partnership with grocery giant Jewel-Osco
to expand its presence in one of its key markets, Chicago. The deal
is in line with the company's strategy to expand through grocery
stores and retail outlets.
Based in Itasca, Illinois, Jewel-Osco is a supermarket chain with
more than 150 stores and is owned by Eden Prairie, Minnesota -based
The Minneapolis-based Caribou recently opened its first coffeehouse
outlet in a Jewel-Osco store in Barrington and plans to unveil two
additional shops in Jewel's Hoffman Estates and Countryside
locations in the near future. Caribou is also expecting to open
five more shops through next year with the grocery chain.
Apart from strengthening its presence in the existing markets, the
agreement will also enhance Caribou's growth among diverse business
units. Moreover, along with offering its signature coffee and
espresso, Caribou also plans to introduce its premium packaged
coffee throughout the grocery chain.
One of the company's nearest competitors,
), also focuses on a multi-channel growth strategy for expansion.
Caribou coffeehouse currently owns and operates 585 coffeehouses,
including 174 franchised locations, in 21 states, the District of
Columbia and nine international markets. The company continues to
drive growth through unit expansion and plans to open 60 to 70
locations in 2012 in both domestic and international markets,
implying a year-over-year upside of 10% to 12%.
The company's international pipeline remains very strong, and in
the second quarter, the company opened its 100th international
location. Thus, Caribou remains in a growth trajectory in the
We believe that Caribou Coffee is well positioned to sustain its
growth momentum, while generating improved earnings on the heels of
innovative offerings. However, a lowered outlook for 2012 and food
cost pressure make us cautious. Hence, we maintain a Zacks #3 Rank
on Caribou Coffee, which translates into a short-term Hold rating.
Our long-term recommendation remains Neutral.
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