The founders of Baratza, Kyra Kennedy and Kyle Anderson have sold their business to Breville Group, the Australian coffee equipment company that clearly has growth plans.
What Will Breville Do with Baratza?
For those of you which subscribe to our newsletter, we mentioned the likelihood of consolidation in the broader industry and cited Breville in particular as a company we think is well positioned for dramatic growth as more people work from home and want an easy to use coffee-making experience.
The question is whether the acquisition will result in the Baratza models disappearing, or if Breville will invest in growing the brand.
Breville has capable conical burr grinders already that are designed for the home user. I’m not convinced it makes sense to run two product lines aimed at a similar demographic.
Consider also that a likely reason for this acquisition would be to allow them to up their game and credibility among serious coffee enthusiasts.
There are ‘defensive’ or ‘consolidation’ plays as well, which can explain the rationale behind the acquisition. The strategy here is to reduce the competition, eventually allowing the dominant company to push up prices.
Most acquisitions make sense when you rationalise costs — i.e. make a number of redundancies where roles overlap. Assuming all else remains equal, profits immediately increase.
The founders of Baratza may well have sought assurances, and perhaps have received them, but it’s likely there will be some job losses. The founders, however, rightly deserve their payday — they built an amazing company, and we wish them the best of luck.
Kyra Kennedy and Kyle Anderson founded Baratza 21 years ago. We’re delighted for them to realise a lovely retirement package and to leave Baratza in a pretty decent pair of hands. We imagine there will be some ‘golden handcuffs’ that keep them on board during a transition period – typically 1-2 years and then we’ll see the brand get assimilated.
“In Breville Group, we are confident we have found a partner with shared values for customer care and a passion for product innovation and enhancing the specialty coffee experience,”
What Happens to the Grinders We Love?
It would be unusual for an acquiring company to discontinue models immediately, but in the next 1-2 years we can expect to see the product line align to Brevilles strategy, which may mean less models.
Some of their technology will certainly get adopted into Brevilles espresso machines with built-in grinders.
Breville is Going to Dominate
My prediction is that Breville is going to make serious gains over the next 2 years. Checking out their share price gains below shows the market believes this too. (note I’m not recommending any stock purchases here, and I do not currently own Breville stock).
Who else is in the home user enthusiast grinder market?
- Eureka (a good alternative imo)
- Niche – expensive
- La Marzocco – expensive
- Mazzer – not really home focused
- Ceaodo – good option
- Rancilio – I don’t have much experience with them, but maybe
There’s a few more, like ECM, but really in the home market Baratza occupied a big mind-space. Grinder companies are going to have to seriously up their game to compete, but it seems to me that at the domestic end of the market, many are asleep at the wheel.
Hence, my personal belief that Breville, with their slick marketing machine, are going to be a dominant force in the home market.
Am I wrong? Comment below and give your opinion.