Caribou Coffee and Einstein Bros. Bagels are being merged in one location scheduled to open Wednesday in Colorado Springs, Colo.
Both Caribou and Einstein Bros.’s parent, Einstein Noah Restaurant Group Inc., or ENRGI, are owned by German private-equity firm Joh. A. Benckiser Group, which plans to open about 20 of the co-branded units before the end of 2015. Of those, 10 will be new locations and the rest will mostly include existing Einstein Bros. units that will be converted.
Mike Tattersfield, president and CEO of Caribou and ENRGI, said it was an opportunity to bring two beloved brands together in a way that doesn’t exist at scale. More growth is planned beyond the first 20 co-branded units, though he could not commit to a number.
“These are products that work together exceptionally well, bagels and coffee. It really does change the landscape,” Tattersfield said. “This will be the only coffee shop where you can get customized, world-class coffee, as well as customized bagels any way you want. Not a lot of competitors do what we can do.”
JAB Holding Co., an affiliate of Joh. A. Benckiser Group, took Einstein Noah private in 2014, in a $374 million deal. Einstein Noah includes the Einstein Bros. brand, which has about 600 locations in 40 states, as well as Noah’s New York Bagels and Manhattan Bagel.
Joh. A. Benckiser, which is based in Ludwigshafen, Germany, acquired Caribou in a $340 million deal in 2012. The Caribou chain includes about 400 locations in the U.S., and another 209 units internationally.
In 2013, Caribou experimented with a co-location strategy with Bruegger’s Bagels, but that was before JAB acquired Einstein Noah. Bruegger’s is owned by Dallas-based Le Duff America Inc.
Tattersfield said that partnership will continue with the eight co-branded Caribou/Bruegger’s units, but growth going forward will focus on the Caribou/Einstein combination.
The move allows Caribou to move into new regions where Einstein Bros. already has a presence, and visa versa.
The Colorado Springs location, a remodeled Einstein Bros. unit, is about 2,700 square feet. The unit has signage outside with both the Caribou and Einstein logos, but inside a combined logo brings the brands together.
The first location is not a drive thru, but future locations will be, Tattersfield said.
There is an opportunity for growth through licensing and franchising, he said, though the first batch will be company owned.
“At this point, we’re big believers that a lot of the learning will happen under the company’s guidance, and we’ll see what the best way for growth is,” he said.
Catering and other off-premise sales are also an opportunity, Tattersfield said.
Next year, the company will experiment with delivery. Caribou has a mobile app, and Einstein Bros. expects to add one next year.
Tattersfield said families on Sunday morning will be able to have coffee and bagels delivered, which he predicted will be a hit.
“These are probably long-term views of where the brand’s going to go, but the customer is asking for that,” he said. “They want to use it as a drive thru. They also want it in their home if you can bring it to them. If you can solve some of those convenience factors without changing the quality of your brand, you’ve got some pretty unique growth potential.”
More co-branded units are planned for Colorado, but the Caribou/Einstein Bros. units will also open in Minnesota, as well as Arizona and Florida, he said.
Following the acquisition of Einstein Noah, the private-equity firm closed 39 underperforming locations in February.
In 2013, Joh. A. Benckiser announced the closure or rebranding of 168 Caribou locations. Of those, 88 were rebranded as Peet’s Coffee & Tea locations, another brand JAB picked up in 2012 in a $1 billion deal.
Tattersfield said the Peet’s brand is run separately within the JAB portfolio, and is not looking to co-brand.