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After purchase of United Coffee, Peerless poised for aggressive expansion.

After purchase of United Coffee, Peerless poised for aggressive expansion

On September 15, 1990, George and Sonja Vukasin closed a deal that brought them United Coffee. Nine months later, having successfully consolidated United operations into their own, the Vukasins are ready to buy again. If all goes as planned, Peerless will purchase another roaster based in Northern California before the end of 1991.

The Peerless team has been laying the groundwork for aggressive expansion in the past three years. In a recent interview, George Vukasin describes how he and Sonja, his partner and wife, "sat down in 1988 and asked themselves where they wanted Peerless Coffee to go." Their answer - to become the best gourmet quality roaster on the West Coast - required serious long-range planning. "We saw three years ago that we could pursue this goal, and do in in a positive and yet aggressive manner. Then we asked ourselves if we had the people and the position necessary to achieve it. The result of that plan was th recruitment of a top-notch sales and accounting staff."

Buyout of United Coffee, 5-year Plan

About mid-year 1990, Peerless put together a task force which included a CPA firm, a law firm, and an acquisitions consultant. At that time, United was a direct competitor for Peerless, and a struggling one. The task force drew up what might be called a five-year plan, while also looking more closely at United. They studied various "pricing structure" models based on the assumption that Peerless could maintain at least 80% of United's customer base. Now eight months after the purchase, Peerless has kept all but 7% of United's business. Renee Jennett, the previous owner of United Coffee, currently serves as vice president of Peerless/ United Divisions. Peerless is also proud of the fact that they retained many of United Coffee's employees, and eliminated jobs only through attrition.

The purchase of United achieved several goals for Peerless. First of all, says Vukasin, they gained a stronger position in the Southern California market, which should interest many of the established gourmet roasters in that region. Geographical expansion, especially along the West Coast, ranks among their top priorities. At the same time, the buyout "reinforced poundage" by about 1.5 million lbs. Increasing volume is critical for the company at this point as it looks to fill out its newly expanded facilities.

Peerless has invested about $5 million dollars in personnel, physical plant and equipment to accomplish its long-range plan. In addition to acquiring United, they purchased the remaining two-thirds of the Oakland commercial block on which their facility has been located along with a 30,000 sq. ft. building of which they currently occupy 25%. The building is 100% leased, with those leases scheduled to expire as Peerless grows.

Peerless remains a family-owned and family-run operation, continuing a tradition begun back in 1924 by John Vukasin, an immigrant from Yugoslavia and George Vukasin's father. Even at that time, Peerless supplied what we would describe today as gourmet roasted coffees to the local hotel and restaurant trade. Today, the company roasts and sells about 12 million pounds of gourmet coffee a year among five divisions. Roughly 45% (5.5 million pounds) is sold to retailers, distributors and brokers in 20 western states who then sell the coffee either under the Peerless label or as a private label product. Another 38%-40% goes to hotels and restaurants in California, Oregon, Washington State and Alaska. Peerless creates custom blends and flavored coffees for many of these divisions, a three-year-old mail order business and the Peerless retail store that has been a part of the company since the beginning, contribute approximately 14% and 1% respectively.

Of their entire product line, Vukasin notes that flavored coffees have posted the most dramatic increase in recent years. He predicts that creative blending, flavoring and innovations such as "half regular, half decaf" will continue to attract consumer interest, and Vukasin plans to fulfill that demand.

Vukasin does not think Peerless, in its strategy for aggresive expansion, is acting in a vacuum. "Other roasters are looking to expand - look at Superior Coffee, for example, a subsidiary of Sara Lee. They are out to buy everybody. So there is certainly some pressure to pursue growth or lose out." The Vukasins are also convinced that to succeed in such an environment requires a committed staff and a management philosophy that offers flexibility and as few rules and regulations as possible; set high expecatations and then give each employee the trust and the room to meet and exceed those expectations. The Peerless approach, according to "The Peerless Grounds Management Philosophy," is "to create the vision, provide the necessary knowledge and training, promote enthusiasm, and then let our people do their jobs." In an increasingly competitive environment, this sounds like one healthy formula for success.

PHOTO : Peerless is based in Oakland, California.
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Peerless Coffee Co.
Author:Hackling, Joan
Publication:Tea & Coffee Trade Journal
Date:Jun 1, 1991
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