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Note: Roger M. Laferty, who was hired by Farmer Bros. in June 2006 as its chief operating officer and prospective chief executive officer, had been the chief executive officer of Diedrich from April 2003 to December 2005, prior to that company's strategic change reported in the article below. See:
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 Saturday, January 27, 2007 Signs of hope in latest Diedrich lossWholesale business looks brighter, even as quarterly loss rises to $2.1 million.
The Orange County Register
So far, the shift from retailer to roaster is showing promise for Diedrich Coffee. The Irvine-based coffee company on Friday posted a second-quarter loss of $2.1 million, a drop that was 47 percent more than its losses a year ago. But other numbers in the report indicate the company's decision late last year to sell most of its retail business to mega competitor Starbucks Corp.and focus on its role as a wholesale distributor of roasted beans might be ready to pay off. Diedrich's wholesale business grew 26 percent in the quarter, to $1.5 million, an upturn that included a 42 percent jump in sales directly to foodservice customers. Overall, Diedrich's second-quarter revenue – including discontinued operations such as the stores it sold to Starbucks – grew 16 percent, to nearly $9.2 million. Some believe Diedrich's brand name could prove a better fit in the wholesale side of the coffee business than it did as a competitor with Starbucks and others. Diedrich began in the early 1970s, in Costa Mesa, primarily as a roaster. "Depending on how they do it, there is potential to make a substantial amount of money" as a wholesaler, said Doug Christopher, a stock analyst at the Los Angeles brokerage Crowell, Weedon & Co. Christopher, who says he follows Starbucks but no longer tracks Diedrich on a day-to-day basis, compared Diedrich's prospects as a wholesaler to the role of value-adding middlemen in other industries. Drug wholesalers, Christopher said, typically gain profit by adding value to the products they distribute. Diedrich, perceived as a distributor of high-quality coffee, could be in a similar position. "Look at a company like Farmer Bros.," Christopher said, referring to the Los Angeles-based coffee wholesaler that sells to many restaurants. "Their profit margin is about 2 percent right now. But it's bounced all over the place. A few years ago, it was 15 percent. It can be done."
Copyright 2007 The Orange County Register |