THE NUMBERS:
Three-year growth: 89%
12-month sales through June: $66.7 million
12-month loss through June: $1.7 million
Recent market value: $140 million
Employees: 193, 80 in OC
Company: coffee roaster and wholesale distributor
Irvine-based Diedrich Coffee Inc. has been on a caffeine-high this year after cutting loose its struggling coffeehouses to focus on its wholesale business.
The company, known for providing coffee to stores, restaurants, offices and coffeehouses, had 12-month sales of $66.7 million as of June 30, up from $35.3 million a year earlier. With a three-year revenue gain of 89%, the company ranks No. 8 on our list of the fastest-growing public companies.
Last year, Diedrich ranked No. 33 on our list.
The coffee wholesaler is seeing results from a multiyear transition from coffeehouse operator to wholesaler.
Diedrich used to compete with Seattle-based Starbucks Corp. through coffeehouses of its own. It began selling off its stores to competitors and franchisees as it moved to become a roaster and wholesaler about three years ago.
It got rid of the last Diedrich stores at the end of 2006, when it sold 40 of them to Starbucks.
In March, the company sold the last of its retail operations when it sold its Gloria Jean’s Gourmet Coffees & Teas chain to Praise International North America, an affiliate of Australia’s Gloria Jean’s Coffees International Pty. Ltd., for $3.1 million.
“Our long-term plan to exit the retail coffee business and concentrate on roasting and K-Cup wholesale distribution ignited a company transformation,” said J. Russell Phillips, chief executive at Diedrich.
The transformation—along with a general coffee rally—sparked a surge in Diedrich’s stock. Since the beginning of the year, its shares have soared over 6,500% on a recent market value of $140 million.
The wholesale business makes up the lion’s share of sales.
One of the main drivers of growth for the company is a new type of single-serving coffee package found in offices and now available at big-box retailers including Wal-Mart Stores Inc. and New Jersey-based Bed Bath & Beyond Inc.
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 Vermont-based coffee wholesaler Green Mountain Coffee Roasters Inc.
The Keurig machine has been a strong seller among companies looking for a way to cut back on the cost of coffee provided for employees.
The company is betting on the forecasted strong growth in Keurig brewer sales and the increasing number of retail locations selling the K-Cups to continue driving revenue.
The company saw a 75% increase in K-Cup sales to $7.8 million in the 12 months through June compared to the same period a year earlier.
“Diedrich Coffee climbed in rank to become the second largest K-Cup roaster out of four exclusively licensed in the Keurig system,” Phillips said.
The move to exit the coffeehouse business comes at a good time for Diedrich. Many fast-food chains, including McDonald’s Corp. with its line of espresso-based drinks at its 14,000 locations, are expected to steal customers from the coffeehouse operators.
And the recession has prompted more consumers to trade buying specialty coffees at stores for brewing at home instead.
The company plans to build upon its online, big-box retail and food service channels. Diedrich also is looking to be more aggressive in grocery stores.
Chairman Paul Heeschen and his Newport Beach-based Sequoia Enterprises LP own about 60% of the company.
Diedrich, founded by Martin Diedrich in 1983, went public in 1996. Martin Diedrich resigned his position at Diedrich in 2004 to return to his coffeehouse roots with Newport Beach-based Kéan Coffee.
