Coffee and bagels concepts test the value of togetherness
Bruegger’s and Caribou are experimenting with a store that sells both their products from a single counter. The key to making co-branding work: non-competitive offerings.
Bruegger’s Bagels and Caribou Coffee have shared a building near a St. Paul, Minnesota, strip center for more than 15 years. Customers went in one door, and then chose either Bruegger’s or Caribou, or they could also go between the two.
Both Burlington, Vermont-based Bruegger’s and the Minneapolis-based Caribou love these locations, because they bring in more traffic. So it’s not surprising the chains are taking these units’ togetherness to the next level, by co-branding them.
A new test run to pair Caribou Coffee and Bruegger’s Bagels will include seven to 10 stores. Stores that are side-by-side have 30 to 50 percent more traffic than stand-alones.
The two companies remade that St. Paul location into a co-branded unit with a single counter and a single dining area. It, along with another location in a St. Paul suburb, are the first of what will be seven to 10 co-branded locations in what’s being described as a test run. Other test sites, all of which will be corporate-owned, will open in Minnesota, and another in North Carolina, in the coming months.
“We have 12 stores that are side-by-side,” Caribou CEO Mike Tattersfield said, adding many of those locations have 30 to 50 percent more traffic than the respective brands’ typical customer counts. “We knew the concepts were working together. The only question is, how do you figure out a way to optimize it in a way that is pretty unique?”
Management of the stores will be divided in this way: In existing Bruegger’s locations, Bruegger’s owns and operates the location and licenses the Caribou brand, and vice versa in existing Caribou stores. Both companies are involved in training, quality control and operations but the operating brand takes the lead.
Spotty track record
Co-branding had once been a hot idea in the franchising space as concepts sought new ways to get customers in the door, but its overall track record has been poor and the idea has largely faded, but for a few scattered examples. Tattersfield knows a thing or two about that: He spent 12 years at Yum Brands, which for a decade built its U.S. business based on the idea it could expand by fitting many of its brands into single locations. It has long since abandoned that idea.
The problem with most co-branded efforts, Tattersfield said, is the brands are competitors. “A lot of time it was brands competing for the same dayparts,” Tattersfield said. “Or their customer segments were completely opposite of one another.” He added that other times the back-of-the-house was so complex, the concepts dumbed down menus to make the ideas work, and that kept customers away who wanted the full brand experience.
But executives for the two chains believe this effort is different, because their products work well together. After all, consumers want breakfast to go with their coffee. And they want coffee to go with their bagels. “It’s a complementary offer,” said Claude Bergeron, co-CEO of LeDuff America, the owner of Bruegger’s.
The combination could help both chains achieve long-held goals to add one another’s product lines.
Caribou, much like its primary competitor Starbucks, has been offering a larger variety of food items in recent years to satisfy its customers’ desire for breakfast. But its offerings have been limited to items made off site.
Tattersfield acknowledged Caribou has a “good” food platform, but “not a great” food offering. By combining with Bruegger’s, Caribou could offer customers better food, with freshly made bagels and sandwiches instead of the premade variety. “Ultimately, you want to get into food,” Tattersfield said.
Likewise, a combination with Caribou can give Bruegger’s something it’s long wanted: a strong coffee offering. Coffee is more of a habitual product than a bagel, meaning consumers will go to coffee shops more frequently, even when the economy slows. In addition, Caribou offers sweet treats and bakery items that attract customers coming at snack time.
Caribou had explored purchasing Bruegger’s when its former owner, Sun Capital, put the brand up for sale in 2010. Bruegger’s was since sold to the French company LeDuff, and then Caribou was taken private by a German company, Joh. A. Benckiser, in 2012.