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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, September 2, 2013

Starbucks' Acquisition of La Boulange

Being an observant type, I noticed that the Starbucks that I wandered into this weekend was festooned in pink.  Breast cancer awareness?  Nope.  Starbucks has "partnered" with a San Francisco-based chain of bakeries called La Boulange, and since La Boulange's color is pink, Starbucks is celebrating its new "partnership" with a complementary color scheme.  The barista who explained all this to me characterized the transaction as an acquisition rather than a partnership, and that seems more accurate, since that's what Starbucks called the transaction when it announced last summer that it acquired La Boulange for $100 million.

Pastries
This is a very interesting transaction.  La Boulange had about 20 cafes in the San Francisco area.  How does La Boulange ramp up its operations to supply 8000 Starbucks outlets with its baked goods without degrading quality?  Working all that out might have been the reason beyond the 14-month delay between the announcement of the partnership and the arrival of the chocolate croissants on my plate.  

San Francisco's Business Times suggests that the creator of La Boulange, Pascal Rigo, still thinks there is a lot to sort out.  His bakeries will continue to exist, and it seems that he plans to double the number of La Boulange outlets in the Bay area.  Meanwhile, he hopes that Starbucks will become known as a cafe and bakery and that it could even become a lunch destination.  That may be a challenge, since people are attracted to Starbucks becasue they can buy a coffee and a snack and spread out at a table for four for four hours while they work on their laptops.  That use of space might not be optimal if Starbucks wants to pack in the lunch crowd. 

The other thing about this transaction that interests me is why it took Starbucks, the company that realized that you can charge people $2 for a small coffee, so long to realize that people who like gourmet coffee also like high-quality baked goods, something the Viennese have known since the 17th century.  Perhaps they were just waiting for the right parntner or perhaps they realized that people who are willing to pay $5 for a fancy coffee-based dessert drink do not want to pay $10 for a fancy coffee-based dessert drink plus a fancy dessert.  Also, some regulars have to avoid the place entirely if it is going to tempt them with delicious desserts each time they enter.

[JT]

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