Irvine-based Diedrich Coffee Inc. has seen its shares surge more than 4,000% in the past two months.
A hot product, growing sales and profits and a coffee rally have driven up Diedrich, which investors had left for dead just months ago.
Diedrich provides coffee to stores, restaurants, offices and coffeehouses and had a market value of about $70 million last week.
Other coffee companies also have seen gains, but nothing like Diedrich?. Shares of rivals are up 20% to 200% in the past two months.
Some could be speculating that little Diedrich is a takeover target, although no rumors have been circulating among those familiar with the company or on stock chat boards.
Diedrich has seen an influx of growth stock investors after posting strong results for the recently ended quarter.
Many are looking for the next Green Mountain Coffee Roasters Inc.?hares of the Vermont coffee wholesaler have tripled since Wall Street? fall meltdown with a market value of $2 billion last week.
Diedrich is seeing results from a multiyear transition from coffeehouse operator to wholesaler.
|
|
||
|
Diedrich K-Cups: driving growth |
It and other wholesalers seem to be benefiting from the recession, according to Steve West, a restaurant analyst with Saint Louis-based Stifel, Nicolaus & Co.
?e?e seeing consumers trade out of specialty coffeehouses to brew at home,?West said. ?he stocks are reacting favorability because of it.?
Those sales have come at the expense of Starbucks Corp., whose stock gain is the weakest among the major coffee companies in recent weeks.
But even Starbucks is starting to benefit from the trend. Its shares rebounded in March on a boost in its business selling packaged coffee through stores and restaurants.
Diedrich used to compete with Starbucks through coffeehouses of its own. It got rid of the last Diedrich stores by 2006, when it sold 40 of them to Seattle-based Starbucks.
In March, Diedrich sold off the last of its retail operation when it sold its Gloria Jean? Coffees chain to Praise International North America, an affiliate of Australia? Gloria Jean? Coffees International Pty Ltd., for $3.1 million.
The sale comes at a time when many predict that McDonald? Corp., which is rolling out a line of espresso-based drinks to all of its 14,000 locations, is expected to steal customers from coffeehouse operators.
Diedrich? wholesale coffee business is posting big numbers.
For the three months through March 4, sales were up 72% from a year earlier to $8 million. The wholesale business made up 96% of sales, rising 80% to $7.7 million.
The company reported a profit of $1.4 million, versus a loss of $2.1 million a year earlier.
A big driver: a new type of single-serving coffee packages found in offices.
Diedrich is one of a handful of companies licensed to make coffee for what are known as K-Cups, developed by Keurig Inc., part of Green Mountain Coffee Roasters.
K-Cups allow you to brew a single cup of coffee in a special machine by putting one of the K-Cups into the slot where coffee grounds and a filter would go on other machines.
?e would say the main driver of our growth is the K-Cup,?a Diedrich? spokesman said.
The Keurig machine has been a hit among companies looking for ways to cut back on the cost of coffee provided for employees.
Green Mountain has signed a deal with Wal-Mart Stores Inc. to sell its K-Cups and coffee makers in 3,000 stores.
Wal-Mart plans to sell K-Cups from Green Mountain Coffee as well as Diedrich.
Diedrich? size also has something to do with its eye-popping stock gain.
At the start of the year, its lightly traded shares sold for about 35 cents. The company has faced doubts about whether it could survive after a failed push to take on Starbucks in the 1990s.
After reporting results for the recently ended quarter, trading of Diedrich? shares has gone from about 7,000 shares a day to around 400,000.
Chairman Paul Heeschen and his Newport Beach-based Sequoia Enterprises LP own about 60% of the company.
With no Wall Street analysts following Diedrich and few free shares to be bought, bullish coffee investors have had a big effect on the stock.
Talk of Diedrich going private has come up from time to time, given that the costs of being public are more burdensome for companies its size.
For now, Diedrich? surge on Wall Street has hushed those talks.
The company recently hired Newport Beach-based investor relations company Liolios Group Inc. to help represent it.
