La Boulange operates 19 retail locations in the Bay Area and sells baked goods, pastries, salads and sandwiches in a casual, sit-down setting. The transaction, which also includes the hiring of renowned French baker Pascal Rigo, is part of Starbucks’ larger effort to expand its food business.
“This is an investment in our core business,” said Howard Schultz, chairman, president and chief executive officer of Starbucks. “After more than 40 years, we will be able to say that we are bakers, too. 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.”
In recent years, Starbucks has enhanced its food offerings based on customer feedback, including removing artificial ingredients wherever possible and diversifying its portfolio to include 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, Starbucks said.
“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, who will oversee the integration and expansion of La Boulange. “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. And we will do it with an unwavering commitment to maintaining the uniqueness, quality and level of care that Pascal is known for baking into each of his croissants, pastries, loafs, cookies and breads.”
Mr. Rigo has lived the traditional art of French baking since he was seven years old when he began work at his village bakery in Paillet, France. Over the past 40 years he has worked for several prestigious bakers near Bordeaux and in Paris, and later he moved to the United States where he has owned and operated several of his own bakeries and restaurants. He opened the first La Boulange store location in San Francisco in 1999.
“La Boulange believes in whole foods made from the freshest ingredients, including specialty grain, European-style butter and locally sourced produce,” said Mr. Rigo, who will be named senior vice-president and general manager of La Boulange bakery at Starbucks upon closing of the acquisition. “We weigh, mix, divide, roll, cut, bake and care about every croissant, cookie, pastry, loaf and bread that goes in our pasty case, and we are looking forward to sharing our passion with Starbucks loyal and discerning customers. We are proud to join the Starbucks organization.”
Starbucks said it plans to make La Boulange products available in Starbucks company-operated retail stores in the United States by making investments to broaden distribution capacity in select markets and working closely with outside suppliers to create various La Boulange products for Starbucks stores nationwide. The company will continue to serve Bay Bread, L.L.C.’s wholesale bakery customers and will evaluate expanding distribution over time.
Starbucks said it will begin offering the new baked goods early in 2013.
The acquisition is expected to dilute earnings by approximately 2c per share in the second half of fiscal 2012, the company said. Bay Bread, L.L.C. and the La Boulange bakery brand will be a wholly-owned subsidiary of Starbucks Corp.
