Starbucks to acquire La Boulange bakery for $100 million

June 4, 2012

Starbucks Corp. has entered into an agreement to acquire Bay Bread, LLC and the La Boulange bakery brand for $100 million in cash and expects the acquisition to dilute earnings by approximately $0.02 per share in the second half of fiscal 2012, compared to the previously announced earnings targets. 

Bay Bread, LLC and its 19-unit La Boulange bakery brand will be a wholly-owned subsidiary of Starbucks Corporation. In addition to its bakery locations, La Boulange sells its products in several upscale restaurants, hotels, and specialty grocery stores in the California region.

Over time, Starbucks plans to make La Boulange products available in Starbucks company-operated retail stores in the U.S. The company also will continue to serve Bay Bread, LLC’s wholesale bakery customers and will evaluate expanding distribution over time.

In addition to the acquisition, Starbucks has announced plans to hire renowned French pastry chef Rigo Pascal. Over the past 40 years, Pascal has worked for several prestigious bakers near Bordeaux and in Paris and later moved to the U.S. where he has owned and operated several of his own bakeries and restaurants. Pascal opened the first La Boulange store location in San Francisco in 1999.

“This is an investment in our core business. 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 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. We looked at opportunities comprehensively when making this acquisition and we believe La Boulange is truly unique in terms of visionary leadership, product taste and quality, brand authenticity, bakery capabilities, and potential for growth.”

The move marks an increased focus on Starbucks' food offerings. In recent years, the company has worked to remove artificial ingredients from its baked goods and launched items of smaller portion sizes. Food now accounts for $1.5 billion in revenues in U.S. company-operated stores and has grown by double digits in each of the last two fiscal years.

Bay Bread, LLC and La Boulange bakery are being acquired from management and an investment group, Next World Group.

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Topics: Bakery Cafe , Business Strategy and Profitability , Coffee / Specialty Beverages , Financing and capital improvements , Operations Management

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