In , the year espresso machines made their appearance, Jerry Baldwin bought Peet's, adding it to a portfolio that included Caravali, a wholesale coffee brand, and a small Seattle chain known as Starbucks. That was when Baldwin first met Peet; in , he and his partners traveled to Berkeley to learn about Peet's coffee before Arthur Peet would sell it to them for use at Starbucks. When they returned to Seattle, they served Peet's coffee for the next 18 months at their new store in the Pike Place Market.
Coffee was poured free into porcelain cups for tasting, and while the customer paused to drink, Baldwin and his staff bombarded him or her with information about coffee. In , Starbucks opened its second store near the University of Washington, and a third store followed soon after.
In , Baldwin sold off Starbucks, which then had only six stores, to Howard Schultz, a former Peet's employee who had left Peet's in to start his own coffee company, Il Giornale. Baldwin's reason for selling off Starbucks was that it would never be as good as Peet's. The deal included a noncompete agreement, which expired in , the year that Starbucks went public and began its astronomic expansion worldwide. Peet's expansion during the s and s was conservative by comparison.
The company opened stores sporadically--one or two every year, all within northern California--and its marketing strategy was low-key. The decision to keep the company small and local was in part a conscious reflection of maintaining Alfred Peet's tradition. Baldwin emphasized quality over quantity and word-of-mouth publicity, which supported the company's message of quality with 'a whisper rather than a shout.
A native of San Francisco, Baldwin started out his work life as a bellhop and doing inventory for clothing stores. After completing a stint in the army, he took time off and traveled to Hawaii, then went to work for Boeing in as a programmer for government contracts such as the Concorde.
Eventually he left the corporate world to become an English teacher. However, while Baldwin admittedly did not like the corporate atmosphere for its bureaucracy, he acknowledged in a Boston Globe article that his time at Boeing gave him some idea of his capabilities. The money allowed Peet's to open a 60,square-foot roastery in Emeryville, which had the capacity to supply stores. The two regarded themselves as friendly competitors with distinct orientations.
Then, in , with the spread of coffee shops still on the rise, Peet's caught the expansion bug. Plotting a national expansion that included opening ten to 15 new stores annually until there were several hundred Peet's across the country, Baldwin aimed to establish a national presence for his high-end company. Peet's would be more vulnerable in a single market than in multiple markets.
New shops were planned to open primarily in cities where Peet's mail-order business already had a solid following. Some in the business world expressed concern that the conservative Peet's could never catch up with Starbucks and faced a significant hurdle in finding affordable real estate in markets where the recent multitude of coffee and bagel chains had pushed prices up. Others expressed concerns about Baldwin's tightly controlling management style and the fact that, even as the company prepared for expansion, two top executives had recently left the company, and it was without a president and chief executive.
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