La Boulange: Starbucks closure of La Boulange shows downside of acquisitions

Starbucks closure of La Boulange shows downside of acquisitions La Boulange croissants and scones are currently found in each Starbucks pastry case across America, and the brightly colored awnings of La Boulange cafes grace nearly every trendy neighborhood in San Francisco. On Tuesday evening, Starbucks announced it would close all 23 retail outlets of La Boulange, the Bay Area bakery chain it purchased in 2012 for $100 million, although it will still serve La Boulange-branded products at its stores. "The problem with Starbucks is they weren't generating enough revenue," said Brian Kelly, a Chicago retail consultant. Starbucks' food sales were up 16 percent over the year before, and the chain's new breakfast sandwiches sparked a 35 percent year-over-year growth in breakfast items. [...] as Starbucks tried to scale up a boutique bakery on a national, if not global, level, it encountered hurdles. Often in mergers and acquisitions, the larger company winds up negatively affecting the smaller company by squeezing out the very thing that made the smaller company desirable, he said. In this case, customers both inside and outside the restaurant industry said La Boulange's food quality suffered. [...] take the Chipotle success story, spurred by McDonald's 1998 investment. In addition to that, the quality at La Boulange decreased also, so it was a double whammy. In the Bay Area food community, the La Boulange/Starbucks fallout carries shades of another high-profile corporate takeover: Hershey's 2005 purchase of Berkeley gourmet chocolatier Scharffen Berger Chocolate. An example is the coffee industry, where the success of monolithic Starbucks spurred Peet's growth potential. Starbucks still assumes all assets, liabilities and equity of Bay Bread LLC, which includes the La Boulange brand.