SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC  20549
                                 ______________
                                    FORM 10-K

[X]       ANNUAL  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
          SECURITIES  EXCHANGE  ACT  OF  1934

          FOR  THE  FISCAL  YEAR  ENDED  DECEMBER  29,  2002

                                       OR

          TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
          SECURITIES  EXCHANGE  ACT  OF  1934

                         COMMISSION FILE NUMBER 0-32233

                            PEET'S COFFEE & TEA, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                         ______________________________

                    WASHINGTON                              91-0863396
     (STATE  OR  OTHER  JURISDICTION  OF                  (I.R.S. EMPLOYER
     INCORPORATION  OR  ORGANIZATION)                    IDENTIFICATION  NO.)

                                1400 PARK AVENUE
                       EMERYVILLE, CALIFORNIA  94608-3520
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE)

                                 (510) 594-2100
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                           COMMON STOCK, NO PAR VALUE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                                      NONE
                            ________________________

     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.          Yes [X]  No[  ].

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K. [  ]

     Indicate  by  check mark whether the registrant is an accelerated filer (as
defined  in  Exchange  Act  Rule  12b-2).  Yes [X]   No [  ]

     The  approximate  aggregate  market  value  of  the  voting  stock  held by
non-affiliates  of the registrant based on the closing price of the Common Stock
on  June  30, 2002 (the registrant's most recently completed second quarter) and
March  14,  2003 as reported by the Nasdaq National Market, was $206,446,131 and
$180,755,204,  respectively.  Shares  of  Common  Stock held by each officer and
director  and  each  person  known  to

                                        1
<PAGE>

the  Company  to  hold  10%  or  more  of the outstanding Common Stock have been
excluded  as  such  persons  may be deemed to be affiliates of the Company. Such
determination  of affiliate status is not necessarily a conclusive determination
for  other  purposes.  As  of  March 14, 2003, 12,255,739 shares of registrant's
Common  Stock  were  outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of  the  proxy  statement related to the registrant's 2003 annual
meeting  of  stockholders,  which  proxy  statement  will  be  filed  under  the
Securities  Exchange  Act of 1934 within 120 days of the end of the registrant's
fiscal year ended December 29, 2002, are incorporated by reference into Part III
of  this  Form  10-K.

                                        2
<PAGE>

<TABLE>
<CAPTION>


                                                TABLE OF CONTENTS
              -------------------------------------------------------------------------------------
                                                                                                  PAGE
              -------------------------------------------------------------------------------------
                                                     PART I
              -------------------------------------------------------------------------------------
<S>           <C>                                                                                    <C>

Item 1.       Business                                                                                4
------------  -------------------------------------------------------------------------------------  --
Item 2.       Properties                                                                              9
------------  -------------------------------------------------------------------------------------  --
Item 3.       Legal Proceedings                                                                      10
------------  -------------------------------------------------------------------------------------  --
Item 4.       Submission of Matters to a Vote of Security Holders                                    10
------------  -------------------------------------------------------------------------------------  --

                                                    PART II
------------

Item 5.       Market for Registrant's Common equity and Related Stockholder Matters                  10
------------  -------------------------------------------------------------------------------------  --
Item 6.       Selected Financial Data                                                                11
------------  -------------------------------------------------------------------------------------  --
Item 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations  12
------------  -------------------------------------------------------------------------------------  --
Item 7A.      Quantitative and Qualitative Disclosure About Market Risk                              21
------------  -------------------------------------------------------------------------------------  --
Item 8        Financial Statements and Supplementary Data                                            27
------------  -------------------------------------------------------------------------------------  --
Item 9        Changes in and Disagreements With Accountants on Accounting and Financial Disclosure   27
------------  -------------------------------------------------------------------------------------  --

                                                    PART III
------------

Item 10.      Directors and Executive Officers of the Registrant                                     28
------------  -------------------------------------------------------------------------------------  --
Item 11.      Executive Compensation                                                                 28
------------  -------------------------------------------------------------------------------------  --
Item 12.      Security Ownership of Certain Beneficial Owners and Management                         28
------------  -------------------------------------------------------------------------------------  --
Item 13.      Certain Relationships and Related Transactions                                         28
------------  -------------------------------------------------------------------------------------  --
Item 14.      Controls and Procedures                                                                28
------------  -------------------------------------------------------------------------------------  --

                                                    PART IV
------------

Item 15.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K                       29
------------  -------------------------------------------------------------------------------------  --
              Signatures                                                                             32
------------  -------------------------------------------------------------------------------------
</TABLE>


                                        3
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     Some  of  the  matters  discussed  under  the  captions  "Risk  Factors,"
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operation,"  "Business"  and  elsewhere  in  this report include forward-looking
statements.  We  have  based  these  forward-looking  statements  on our current
expectations and assumptions about future events, including, among other things:

-     Implementing  our  business  strategy;
-     Attracting  and  retaining  customers;
-     Obtaining  and  expanding  our  market presence in new geographic regions;
-     The  availability  of  high  quality  Arabica  coffee  beans;
-     Consumers  tastes  and  preferences;  and
-     Competition  in  our  market.

     In  some  cases, you can identify forward-looking statements by terminology
such  as  "may,"  "will," "should," "could," "predict," "potential," "continue,"
"expect,"  "anticipate,"  "future,"  "intend," "plan," "believe," "estimate" and
similar expressions (or the negative of such expressions).  These statements are
based  on our current beliefs, expectations and assumptions and are subject to a
number  of  risks  and  uncertainties.  Actual  results,  levels  of  activity,
performance,  achievements  and events may vary significantly from those implied
by  the forward-looking statements.  A description of risks that could cause our
results  to  vary appears under the caption "Risk Factors" and elsewhere in this
report.  Forward-looking statements speak only as of the date of this report and
we  assume  no  obligation  to  update  any  forward-looking  statements.


                                     PART I

ITEM  1.     BUSINESS

     Peet's  is a specialty coffee roaster and marketer of branded fresh roasted
whole  bean  coffee.  We  sell  our  fresh roasted coffee under strict freshness
standards  through  multiple  channels of distribution including grocery stores,
online  and  mail  order,  office,  restaurant  and food service accounts and 68
company-operated  stores  in  four  states.

     We  believe  that  roasted  coffee  is  a  perishable product and we pursue
distribution  channels  that are consistent with our strict freshness standards.
For  instance,  our  distribution  to  grocery  stores  emphasizes the use of an
existing  network  of  distributors  who  deliver  fresh  goods  to our targeted
accounts.  Our  online and mail order customers are shipped coffee directly from
our  facility  and  we  roast  to  order.  Our  goal is to ensure that customers
receive  coffee  within  days  of  roasting.

     Over  the  past  five years, we have expanded from a regional retailer that
operates its own outlets into a national coffee brand available through multiple
channels  of  distribution.  We  extended  our  retail  presence  to  Southern
California  in 1997, Chicago and Portland in 1998 and Boston in 1999.  We signed
our  first  office  coffee distribution agreement in 1997 and have since added a
number  of restaurants, food service accounts, and office coffee distributors in
select  markets.  We  added online ordering capability to our website in 1997 to
complement our existing mail order business and have since invested in marketing
programs  designed  to  support  our online and mail order channel.  In 1998, we
initiated  a strategic expansion into specialty grocery and gourmet food stores.
In  2002,  this  expansion  was  further  developed  to  include distribution to
mainstream  grocers;  as we expanded our grocery accounts from 130 to over 1,400
stores primarily as a result of our distribution agreement with Safeway Inc.  We
believe  our expansion strategy emphasizes disciplined growth and enhancement of
our brand's image and quality reputation.  See Note 13, "Segment Information" to
the  "Notes  to  Consolidated  Financial Statements", included elsewhere in this
report.

     Our  website  is located at www.peets.com.  Our annual report on Form 10-K,
quarterly  reports  on Form 10-Q and current reports on Form 8-K, as well as any
amendments  or  exhibits  to those reports, are available free of charge through
our  website  at  http://investor.peets.com/edgar.cfm  as  soon  as  reasonably
practicable  after  we  file them with, or furnish them to, the SEC.  Peet's was
organized  as  a  Washington  corporation  in  1971.


                                        4
<PAGE>

COMPANY  RETAIL  STORES

     We operate 68 retail stores in four states through which we sell whole bean
coffee,  beverages  and  pastries, tea, and other related items.  Our stores are
designed  to  facilitate  the  sale  of fresh whole bean coffee and to encourage
customer  trial  of  our  coffee  through  coffee  beverages.  Each  store has a
dedicated  staff  person at the bean counter to take orders and assist customers
with  questions  and  issues.  Upon  order,  beans are scooped and ground to the
customer's  specific requirement.  To ensure that the freshest beans are sold to
customers,  we  implemented  a  policy  to  not  sell beans beyond ten days from
roasting  and we trained our store managers to order and replenish coffee daily.
Our  beverage  counter  features coffee based beverages that promote the sale of
whole  bean  coffee with a standard rotation of coffee brewed from each category
of  coffees  we  sell.  It  is our policy to brew a new batch of coffee every 30
minutes  and not re-heat milk in espresso based drinks to ensure freshness.  See
"Item  2.  Properties"  for  further  discussion  about  our  retail  stores.

SPECIALTY  SALES

     In  addition  to  sales  through  our  retail  stores, we have expanded the
availability  of  our  products  through  a network of grocery stores, including
Safeway  Inc.,  Whole  Foods  Markets,  and  Bristol  Farms.  To  support  this
expansion,  we  have  developed  a  direct  store  delivery  ("DSD")  sales  and
distribution  system.  Peet's  DSD  route sales representatives deliver to their
stores  weekly,  properly  shelve  the  product,  work  to  resolve  pricing
discrepancies,  rotate  to  ensure  freshness,  sell  and  erect  free-standing
displays,  and  forge  store-level  selling  relationships.  We  expect  to have
approximately 50 DSD route sales representatives in 2003, of which approximately
30 will be full-time Peet's employees, to support the expansion into new grocery
accounts  in  the  western United States as well as existing Safeway stores.  In
the  food  service  and  office  business,  we have a staff of sales and account
managers  who make sales calls to potential and existing accounts and manage our
distributor  network.  Additionally  we  have  established  relationships  with
office,  restaurant  and food service distributors to expand our account base in
select  markets.  These distributors have their own sales and account management
resources.  In  the  online  and mail order channel, we have a dedicated website
and  customer  service  representatives  that  provide  points of contact to our
customers  for  coffee  ordering  and coffee knowledge.  Our website features an
Express Buy function for registered customers for speed and ease, special coffee
and  tea  programs,  and  a  coffee  and  tea selector to assist the customer in
choosing  a  product  based  upon  certain  characteristics.  In addition to our
website,  we  have  a  team  of  mail order customer service representatives who
assist  customers  in  placing  customer orders, choosing a gift item, providing
product  information,  and  resolving  customer  issues.  Customer  service
representatives are regularly trained on Peet's product offerings through weekly
coffee  and  tea  tastings.

OUR  COFFEE

   Coffee  Beans

     Coffee is an agricultural crop that undergoes price fluctuation and quality
differences  depending  on  weather, economic and political conditions in coffee
producing  countries.  We  purchase  only  Arabica  coffee  beans,  which  are
considered  superior to the Robusta coffee beans traded in the commodity market.
Arabica beans usually grow at high elevations, absorb little moisture and mature
slowly.  Thus,  although most coffee trades in the commodity market, the Arabica
beans  purchased  by  us  tend  to  trade on a negotiated basis at a substantial
premium  above  commodity coffee prices, depending upon the supply and demand at
the  time  of purchase.  Our access to high quality Arabica beans depends on our
relationships  with  coffee  brokers,  exporters  and growers, with whom we have
built  long-term  relationships  to  ensure  a steady supply of coffee beans. In
2002, we purchased over half of our coffee beans through one broker.  We believe
that,  as  a result of our reputation that has been built over 37 years, we have
access  to  some of the highest quality coffee beans from the finest estates and
growing  regions  around  the  world  and  we  are  occasionally  presented with
opportunities  to  purchase  unique  and  special  coffees.

     Unlike  roasted coffee beans, green coffee beans are not highly perishable.
We  generally  turn  our  inventory of green coffee beans two to three times per
year.  We  generally carry approximately $4 million to $8 million worth of green
coffee  beans  in  our  inventory.  If Arabica coffee beans from a region become
unavailable  or  prohibitively  expensive,  we  may  be  forced  to  discontinue
particular coffee types and blends or substitute coffee beans from other regions
in  our  blends.  From  time  to  time,  we  mitigate  the  risks  associated by
fluctuations  in  coffee  prices  by  entering  into fixed price commitments and
hedging  agreements  for  a  portion  of  our  green  coffee  bean requirements.

                                        5
<PAGE>

   Our  Roasting  Method

     Our roasting method was first developed by Alfred Peet and perfected by our
talented and skilled roasting personnel.  We roast by hand in small batches, and
we  rely  on  the skills and training of each roaster to maximize the flavor and
potential  in our beans.  Our roasters undergo a two year apprenticeship program
to learn our roasting method and to gain the skills necessary to roast coffee at
Peet's.

   Coffee  Types  and  Blends

     Beyond  sourcing  and  roasting,  we have developed a reputation for expert
coffee  blending.  Our  blends,  such  as  Major  Dickason's  Blend(R), are well
regarded  by  our customers for their uniqueness, consistency and special flavor
characteristics.  We  sell  approximately  32  types  of  coffee as regular menu
items.  Included  in  this  figure  are approximately 21 blends with the balance
being  single  origin  coffees  from  countries  such as Colombia, Guatemala and
Kenya.  In 2001, we introduced a line of high-end reserve coffees, such as Kona,
Jamaica  Blue  Mountain, Aged Moka Java, and JR Reserve Blend(R).  We are active
in  seeking,  roasting  and selling unique special lot and one-time coffees.  On
average,  we  offer  four  to  six  such  coffees  every  year.

TEA,  FOOD  AND  MERCHANDISE

     Peet's  offers  a  line  of  hand  selected whole leaf and bagged tea.  Our
quality standards for tea are very high. We purchase tea directly from importers
and  brokers and store and pack the tea at our facility in Emeryville.  We offer
a  limited  line  of  specialty  food  items, such as jellies, jams and candies.
These  products  are  carefully  selected  for  quality  and  uniqueness.

     Our  merchandise  program  consists  of items such as brewing equipment for
coffee  and  tea,  paper  filters  and  brewing  accessories  and  branded  and
non-branded cups, saucers, travel mugs and serveware.  We do not emphasize these
items, but we carry them in retail stores and offer them through online and mail
order  as  a  means  to  reinforce  our  authenticity  in  coffee  and  tea.

COMPETITIVE  POSITIONING

     The specialty coffee market can be characterized as highly fragmented.  Our
primary  competitors in whole bean specialty coffee sales include Gevalia (Kraft
Foods),  Green  Mountain  Coffee,  Illy  Caffe ,  Millstone  (Procter & Gamble),
Seattle's  Best  (AFC  Enterprises)  and Starbucks.  There are numerous smaller,
regional  brands that also compete in this category.  We also compete indirectly
against  all  other  coffee brands on the market.  A number of nationwide coffee
marketers,  such  as  Kraft Foods, Procter & Gamble and Nestle, are distributing
premium coffee brands in supermarkets.  These premium coffee brands may serve as
substitutes  for  our  whole  bean  coffee.

     In  addition  to competing with other distributors of whole bean coffee, we
compete  with  retailers  of  prepared beverages, including coffee house chains,
particularly  Starbucks,  numerous convenience stores, restaurants, coffee shops
and  street  vendors.

     Despite  competing  in a fragmented category, increased consumer demand has
resulted  in  specialty  coffee  brands  being  established  across  multiple
distribution  channels.  Several  competitors  are  aggressive  in  obtaining
distribution  in  specialty  grocery  and  gourmet  food  stores, and in office,
restaurant and food service locations.  We have only recently begun to penetrate
these  channels.

     We  believe  that  our customers choose among specialty coffee brands based
upon  quality,  variety,  convenience,  and  to a lesser extent, price. Although
consumers  may  differentiate coffee brands based on freshness (as an element of
coffee  quality), to our knowledge, few significant competitors focus on product
freshness  and  roast-dating  in  the same manner as Peet's. We believe that our
market  share  in  the  specialty  category is based on a solidly differentiated
position built on our freshness standards and artisan-roasting style. Because of
the  fragmented  nature  of  the  specialty  coffee market, we cannot accurately
estimate  our  market  share.  However,  many  of  our existing competitors have
significantly  greater  financial,  marketing  and  operating resources than us.

                                        6
<PAGE>

     Our roasted coffee is priced in tiers.  Our regular menu coffees are priced
within  a  range  of  $8.95  to  $17.95 per pound.  Our line of high-end reserve
coffees,  which  we  introduced in 2001, is priced between $49.90 and $79.90 per
pound.  We believe our higher quality and freshness standards allow us to charge
a  higher  price  for  our  coffee  products.

INTELLECTUAL  PROPERTY

     We  regard  intellectual property and other proprietary rights as important
to  our  success.  We  own  several  trademarks and service marks that have been
registered  with  the  United  States  Patent  and  Trademark  Office, including
Peet's(R),  Peet's Coffee & Tea(R), peets.com(R), Blend 101(R), Garuda Blend(R),
JR  Reserve  Blend(R),  Maduro Blend(R), Major Dickason's Blend(R), Pride of the
Port(R),  Pumphrey's  Blend(R),  Sierra  Dorada  Blend(R),  Summer House(R), Top
Blend(R),  and  Vine Street Blend(R).  We also have registered trademarks on our
stylized logo.  In addition, we have applications pending with the United States
Patent and Trademark Office for a number of additional marks, including Espresso
Forte(TM)  and  Gaia  Organic  Blend(TM).

     We own registered trademarks for our name and logo in Argentina, Australia,
Brazil,  Canada,  Chile,  China,  the  European  Community,  Hong  Kong,  Japan,
Paraguay,  Singapore,  South  Korea,  Taiwan,  and  Thailand.  We  have  filed
additional  applications  for  trademark  protection  in  the  Philippines.  In
addition to peets.com and coffee.com, we own several other domain names relating
to  coffee,  Peet's  and  our  roasting  process.

     In addition to registered and pending trademarks, we consider the packaging
for our coffee beans (consisting of dark brown coloring with African-style motif
and lettering with a white band running around the lower quarter of the bag) and
the  design  of  the  interior  of our stores (consisting of dark wood fixtures,
classic  lighting,  granite  countertops  and  understated  color)  to be strong
identifiers  of  our brand.  Although we consider our packaging and store design
to  be  essential  to  our brand identity, we have not applied to register these
trademarks  and  trade  dress,  and  thus  cannot  rely on the legal protections
afforded  by  trademark  registration.

     Our  ability  to  differentiate  our  brand  from  those of our competitors
depends,  in  part,  on the strength and enforcement of our trademarks.  We must
constantly  protect  against  any  infringement by competitors.  If a competitor
infringes  on  our  trademark  rights,  we  may  have to litigate to protect our
rights,  in which case, we may incur significant expenses and divert significant
attention  from  our  business  operations.

INFORMATION  SYSTEMS

     The  information  systems  installed  at  Peet's  are  used  to  manage our
operations  and  increase  the  productivity of our workforce.  We have recently
implemented  an  advanced  point-of-sale  system to increase store productivity,
provide  a  higher  level  of  service  to  our  customers  and  maintain timely
information  for  performance  evaluation.  Our  new registers have touch screen
components and full point-of-sale capability.  We implemented a Peet's cash card
in our retail stores and website that will, in the future, allow us to implement
customer loyalty programs.  Currently, we are implementing business intelligence
software  to  better  support  and  analyze  our  business  in all channels.  In
addition,  we  are  also  deploying  a  labor  and scheduling system to increase
productivity  in  our  retail  stores.

     Our  website  is  hosted  at  our  corporate  headquarters  in  Emeryville,
California.  All  website  applications are built on Microsoft ASP with in-house
development.  We  offer  full-functioning  e-commerce and our site is integrated
with  our  call  center  for  access to orders placed at both locations.  Online
delivery  confirmation  is  provided  by United Parcel Service and United States
Postal Service.  Our peets.com site contains several customer-centered functions
such as Express Buy (which stores customer-specific lists of favorite coffee and
items),  multiple  ''ship-to''  capability on a single bill and extensive coffee
search  and  product matching.  Website and call center system functionality are
designed  to  accommodate  the  need  for  customers  to  place repeat orders or
automatic  orders  delivered  on a pre-set schedule.  We designed our website to
provide  fast,  easy and effective operation when navigating and shopping on our
site.  We have dedicated information technology employees and marketing staffers
for  website  maintenance,  improvement,  development  and  performance.

                                        7
<PAGE>

EMPLOYEES

     As  of  March  14,  2003,  we  employed  a  workforce  of  1,667  people,
approximately  324  of  whom  are  considered  full-time employees.  None of our
employees  are  represented by a labor union.  We consider our relationship with
our  employees  to  be  good.  Since 1979, we have provided full benefits to all
employees who work at least 21 hours per week.  We continue to offer competitive
benefits  packages  to  attract  and  retain  valuable  employees.

GOVERNMENT  REGULATION

     Our coffee roasting operations and our retail stores are subject to various
governmental  laws,  regulations,  and  licenses relating to customs, health and
safety,  building  and  land  use,  and  environmental protection.  Our roasting
facility is subject to state and local air-quality and emissions regulation.  If
we  encounter difficulties in obtaining any necessary licenses or complying with
these  laws  and  regulations,  then:

-     The  opening  of  new  retail  locations  could  be  delayed;
-     The  operation  of  existing  retail  locations  or  our  coffee  roasting
      operations  could  be  interrupted;  or
-     Our  product  offerings  could  be  limited.

     We believe that we are in compliance in all material respects with all such
laws  and  regulations  and that we have obtained all material licenses that are
required  for  the  operation  of  our  business.  We  are  not  aware  of  any
environmental  regulations  that  have  or  that we believe will have a material
adverse  effect  on  our  operations.

OUR  EXECUTIVE  OFFICERS

     Set  forth  below is information with respect to the names, ages, positions
and  offices  of  our  executive  officers  as  of  March  14,  2003.

<TABLE>
<CAPTION>

NAME                 AGE                                  POSITION
-------------------  ---  -------------------------------------------------------------------------
<S>                  <C>  <C>

Patrick J. O'Dea      41  Chief Executive Officer, President and Director
-------------------  ---  -------------------------------------------------------------------------
Mark N. Rudolph       44  Chief Financial Officer, Vice President, Treasurer and Secretary
-------------------  ---  -------------------------------------------------------------------------
Michael J. Cloutier   48  Vice President, Information Technology
-------------------  ---  -------------------------------------------------------------------------
James E. Grimes       47  Vice President, Operations and Information Systems
-------------------  ---  -------------------------------------------------------------------------
William M. Lilla      47  Vice President, Foodservice/Office and New Business Development
-------------------  ---  -------------------------------------------------------------------------
Deborah McGraw        61  Vice President, Retail Operations
-------------------  ---  -------------------------------------------------------------------------
Peter B. Mehrberg     44  Vice President, New Store Development & International and General Counsel
-------------------  ---  -------------------------------------------------------------------------
James A. Reynolds     64  Vice President, Coffee and Tea
-------------------  ---  -------------------------------------------------------------------------
</TABLE>

Patrick  J.  O'Dea  has  served  as  Chief Executive Officer, President and as a
director  since  May  2002.  From  April  1997  to  March  2001,  he  was CEO of
Archway/Mother's Cookies and Mother's Cake & Cookie Company.  From 1995 to 1997,
Mr.  O'Dea  was  the  Vice President and General Manager of the Specialty Cheese
Division  of  Stella  Foods.  From  1984  to 1995, he was with Procter & Gamble,
where  he  marketed  several  of  the  company's  snack  and  beverage  brands.

Mark  N. Rudolph has served as Chief Financial Officer since September 1988.  He
was  appointed  Vice  President in September 1994 and Treasurer and Secretary in
May  2001.  Mr. Rudolph served as Assistant Secretary from September 1994 to May
2001.

Michael  J.  Cloutier  has  served  as Vice President, Information Systems since
August  1999.  He  was a Systems Manager for Peet's from August 1999 to December
1999.  Between  October  1997 and August 1999, Mr. Cloutier founded two computer
consulting  businesses,  1 - 2 - 1 Solutions and Pleasanton Partners, Inc.  From
April 1996 to October 1997, Mr. Cloutier served as Vice President, Operations of
M1 Software, Inc., a software development company.  From 1993 to April 1996, Mr.
Cloutier  was  the  Deputy  Business  and Strategic Planning Officer at the Mare
Island  Naval  Shipyard.

                                        8
<PAGE>

James  E.  Grimes  has  served  as  Vice President of Operations and Information
Systems  since  July  2002.  In  August  2001,  Mr.  Grimes founded Supply Chain
Consulting,  where  he provided supply chain management expertise.  From January
2001  through  August  2001,  Mr.  Grimes was Senior Vice President of Strategic
Planning-Operations  at  Parmalat  Bakery Division, North America.  From 1998 to
2001,  he  was  Senior Vice President of Operations at Archway/Mother's Cookies.
Previously,  Mr.  Grimes  held  various  positions  at  Mother's Cake and Cookie
Company.  Before  joining  Mother's,  he  was at Frito Lay and Procter & Gamble.

William  M.  Lilla has served as Vice President since April 1998.  He has served
the  Company  in several roles, including Vice President, Marketing and Strategy
and  Vice  President, Food Service and New Business Development.  Before joining
Peet's,  Mr. Lilla was employed by The Heublein Wines Group as Vice President of
Strategy  from  October  1997  to  April  1998, Vice President of Marketing from
September 1994 to October 1997, and Director of Marketing from September 1993 to
September  1994.

Deborah  McGraw  has  served  as Vice President, Retail Operations since October
1995.  She  has  worked for Peet's in various capacities since 1983.  Ms. McGraw
became  a  store  manager  in 1989 and was promoted to District Manager in March
1989, to Regional Director in January 1994, and to Director of Retail Operations
in  September  1994.

Peter  B.  Mehrberg  has served as Vice President since 1997.  He has served the
Company  in  several  roles,  including Vice President, Business Development and
Vice  President,  Real  Estate.  Mr. Mehrberg has also served as General Counsel
since September 1994.  From July 1994 to June 1997, Mr. Mehrberg was Director of
Real  Estate.

James  A.  Reynolds  has served as Vice President, Coffee and Tea since February
1994, and served as Secretary from February 1988 to May 2001.  He also served as
a  director  from  1985  to  1997.  He  joined  Peet's  in  1984.


ITEM  2.     PROPERTIES

     Peet's  headquarters  are  located  in  Emeryville,  California,  where the
Company  leases approximately 60,000 square feet of office and production space,
including  roasting  and  direct  delivery fulfillment facilities.  Within these
facilities,  we  have 15,000 square feet devoted to general corporate and retail
overhead  and a call center for the direct delivery business.  Our lease expires
in  2005  and we have an option to extend the lease for an additional ten years.

     We  operate  68  retail stores in four states. Our retail locations are all
company  operated  in  leased  facilities. Our store size averages approximately
1,800  square  feet.  Our  stores  are typically located in urban neighborhoods,
suburban  shopping centers (usually consisting of grocery, specialty and service
stores)  and  high-traffic  streets.

     The  following  table  lists  the  number  of retail stores we have in each
location  as  of  March  14,  2003:

<TABLE>
<CAPTION>

LOCATION                            NUMBER
----------------------------------  ------
<S>                                 <C>

San Francisco Bay Area, California      34
----------------------------------  ------
San Jose, California                     6
----------------------------------  ------
Sacramento, California                   4
----------------------------------  ------
Santa Cruz, California                   1
----------------------------------  ------
Santa Barbara, California                1
----------------------------------  ------
Greater Los Angeles, California          8
----------------------------------  ------
Orange County, California                1
----------------------------------  ------
San Diego, California                    2
----------------------------------  ------
Chicago, Illinois                        2
----------------------------------  ------
Portland, Oregon                         3
----------------------------------  ------
Boston, Massachusetts                    6
----------------------------------  ------

TOTAL                                   68
----------------------------------  ======
</TABLE>

                                        9
<PAGE>

ITEM  3.     LEGAL  PROCEEDINGS

     In  the  ordinary  course  of our business, we may from time to time become
involved  in  certain legal proceedings.  On February 25, and March 7, 2003, two
lawsuits  were  filed against the Company entitled Brian Taraz, et al vs. Peet's
Coffee & Tea, Inc., and Tracy Coffee, et al. vs. Peet's Coffee & Tea, Inc.  Each
was  filed  in  Superior Court of the State of California, County of Orange, and
seeks  class action certification.  These suits were filed by one former and one
current  store  manager  alleging  misclassification  of employment position and
seeking damages, restitution, reclassification and attorneys fees and costs.  We
are  investigating  and intend to vigorously defend this litigation, but because
the  cases  are  in  their early stages, the financial impact to the Company, if
any,  cannot  be  predicted.


ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     No  matters  were  submitted  to  a vote of our security holders during the
quarter  ended  December  29,  2002.


                                     PART II


ITEM  5.     MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED STOCKHOLDER
MATTERS

MARKET  FOR  THE  REGISTRANT'S  STOCK

     The Company's common stock commenced regular trading on the Nasdaq National
Market  System  under  the  symbol  ''PEET'' on January 25, 2001.  Prior to that
time,  there was no public market for the Company's common stock.  The following
table sets forth, for the periods indicated, the high and low closing prices for
our  common  stock  as  reported on the Nasdaq National Market since January 25,
2001.

<TABLE>
<CAPTION>

                                                   HIGH      LOW
                                                  -------  -------
FISCAL YEAR ENDED DECEMBER 29, 2002
------------------------------------------------
<S>                                               <C>      <C>

     Fourth Quarter                               $16.240  $10.800
------------------------------------------------  -------  -------
     Third Quarter                                $17.030  $12.000
------------------------------------------------  -------  -------
     Second Quarter                               $18.890  $12.880
------------------------------------------------  -------  -------
     First Quarter                                $16.150  $10.850
------------------------------------------------  -------  -------
FISCAL YEAR ENDED DECEMBER 30, 2001
------------------------------------------------
     Fourth Quarter                               $11.500  $ 7.350
------------------------------------------------  -------  -------
     Third Quarter                                $ 9.060  $ 6.180
------------------------------------------------  -------  -------
     Second Quarter                               $10.000  $ 7.250
------------------------------------------------  -------  -------
     First Quarter (commencing January 25, 2001)  $16.125  $ 6.125
------------------------------------------------  -------  -------
</TABLE>


     As  of  March  14, 2003, there were approximately 282 registered holders of
record  of  the  Company's common stock.  On March 14, 2003, the last sale price
reported  on  the  Nasdaq National Market System for the common stock was $15.79
per  share.

DIVIDEND  POLICY

     We have not declared or paid any dividends on our capital stock since 1990.
We  expect  to  retain any future earnings to fund the development and expansion
our  business.  Therefore,  we  do  not  anticipate paying cash dividends on our
common  stock  in  the foreseeable future. Our current credit facility restricts
our  ability  to  pay  dividends.  See ''Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations  -  Liquidity  and  Capital
Resources.''

USE  OF  PROCEEDS  FROM  SALES  OF  REGISTERED  SECURITIES

     We completed our initial public offering of our common stock in January and
February  2001  pursuant to a Registration Statement on Form S-1 initially filed
on  October  13,  2000, as subsequently amended (the ''Registration Statement'')
(File  No.  333-47597).  As of March 14, 2003, $17.4 million of the net proceeds
from the offering had been used for debt reduction, and the remainder of the net
proceeds  was  invested  in  short-term,  interest-bearing,  investment  grade
securities.

                                       10
<PAGE>

     We  completed  our  secondary  public offering of our common stock in April
2002  pursuant  to a Registration Statement on Form S-3 initially filed on March
27,  2002,  as  subsequently  amended  (the  "Registration  Statement" (File No.
333-85085).  The  aggregate proceeds to us from the offering were $43.9 million.
We  paid  expenses  of  approximately  $2.9 million, of which approximately $2.4
million  represented  expenses related to underwriters' fees.  Net proceeds from
the  offering were $41.0 million.  As of March 14, 2003, all of the net proceeds
were  invested  in short-term and long-term, United States Government and Agency
securities.  We  expect  that our use of proceeds from the offering will conform
to  the  intended  use of proceeds as describe in our prospectus dated April 19,
2002,  except  that the proceeds have been invested in short-term and long-term,
interest-bearing  United  States Government and Agency securities until required
for  working  capital  purposes.


ITEM  6.     SELECTED  FINANCIAL  DATA

     The  table  below  shows  selected consolidated financial data for our last
five fiscal years.  Our fiscal year is based on a 52 or 53 week year and ends on
the  Sunday  closest  to  the  last  day  in  December.

     The  following  selected  consolidated  financial  data  should  be read in
conjunction  with  our  consolidated  financial statements and related notes and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations"  included  elsewhere  in  this  report.

<TABLE>
<CAPTION>

                                     SELECTED CONSOLIDATED FINANCIAL DATA
                                     (in thousands, except per share data)

                                                                                   YEAR
                                                             ----------------------------------------------

                                                               1998      1999      2000      2001      2002
                                                             --------  --------  --------  --------  ---------
<S>                                                          <C>       <C>       <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
Net revenue                                                  $59,787   $69,059   $84,302   $94,400   $104,073
Cost of sales and related occupancy expenses                  30,303    33,641    40,655    45,357     48,146
Operating expenses                                            18,175    22,115    28,073    30,617     33,221
Marketing and advertising expenses                             2,176     3,491     6,069     4,812      4,554
General and administrative expenses                            5,303     5,551     5,893     6,243      6,732
Depreciation and amortization expenses                         2,711     3,404     4,576     5,038      4,568
                                                             --------  --------  --------  --------  ---------
Income (loss) from operations                                  1,119       857      (964)    2,333      6,852
Interest income (expense), net                                  (709)     (985)   (1,907)     (429)       540
                                                             --------  --------  --------  --------  ---------
Income (loss) before income taxes                                410      (128)   (2,871)    1,904      7,392
Income tax (provision) benefit                                  (242)      (16)      596      (749)    (2,735)
                                                             --------  --------  --------  --------  ---------
Net income (loss)                                            $   168   $  (144)  $(2,275)  $ 1,155   $  4,657
                                                             ========  ========  ========  ========  =========

Net income (loss) per share:
     Basic                                                   $  0.04   $ (0.03)  $ (0.50)  $  0.15   $   0.43
                                                             ========  ========  ========  ========  =========
     Diluted                                                 $  0.03   $ (0.03)  $ (0.50)  $  0.14   $   0.40
                                                             ========  ========  ========  ========  =========

Shares used in calculation of net income (loss) per share:
     Basic                                                     4,397     4,489     4,515     7,941     10,919
                                                             ========  ========  ========  ========  =========
     Diluted                                                   5,710     4,489     4,515     8,212     11,627
                                                             ========  ========  ========  ========  =========

BALANCE SHEET DATA:
Cash and cash equivalents                                    $   873   $ 1,074   $ 1,598   $ 2,718   $ 19,672
Working capital (deficit)                                     (1,333)   (5,486)   (2,853)    3,315     22,499
Total assets                                                  29,864    34,650    39,721    41,409     95,145
Borrowings under line of credit                                4,472     5,600     4,246     1,968          -
Current portion of long-term borrowings                        1,701     2,816     2,037       513        468
Long-term borrowings, less current portion                     5,962     7,240    14,544       895        424
Total shareholders' equity                                    10,791    11,191     9,167    28,770     80,504
</TABLE>


                                       11
<PAGE>


ITEM  7.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
             RESULTS  OF  OPERATIONS

     You  should  read the following discussion and analysis in conjunction with
our  consolidated  financial  statements and related notes included elsewhere in
this  report.  Except  for historical information, the discussion below contains
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange  Act  of  1934.

COMPANY  OVERVIEW  AND  INDUSTRY  OUTLOOK

     Peet's  is a specialty coffee roaster and marketer of branded fresh roasted
whole  bean  coffee  sold  through multiple channels of distribution.  Since the
founding  of our business in 1966, we have established a customer base and brand
recognition in California.  Our national expansion strategy is based on the sale
of  whole  bean coffee in multiple channels of distribution.  While we intend to
continue  the  sale  of  whole  bean coffee through strategically located retail
stores,  we  expect  revenue  in our other distribution channels, namely grocery
stores,  online and mail order and office, restaurant and food service accounts,
to  increase  at  a  more  rapid  rate.  We  are  also  continuing  to  explore
opportunities  internationally  through  strategic  relationships.

     We  expect  the  specialty coffee industry to continue to grow.  We believe
that  this  growth will be fueled by continued consumer interest in high quality
coffee  and  related  products.

     Our operations are vertically integrated.  We purchase Arabica coffee beans
from  countries around the world, apply our artisan-roasting techniques and ship
fresh  coffee  daily  to  our  stores and customers within 24 hours of roasting.
Control of purchasing, roasting, packaging and distribution of our coffee allows
us  to  maintain our commitment to freshness, is cost effective and enhances our
margins  and  profit  potential.

CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting  principles requires the appropriate application of certain
accounting  policies, many of which require us to make estimates and assumptions
about  future  events  and  their  impact  on  amounts reported in our financial
statements  and  related  notes.  Since future events and their impact cannot be
determined  with  certainty,  the actual results will inevitably differ from our
estimates.  Such  differences  could  be  material  to the financial statements.

     We  believe  our  application  of  accounting  policies,  and the estimates
inherently  required  therein,  are  reasonable.  These  accounting policies and
estimates  are  constantly  reevaluated, and adjustments are made when facts and
circumstances  dictate a change.  Historically, we have found our application of
accounting  policies  to  be  appropriate,  and actual results have not differed
materially  from  those  determined  using  necessary  estimates.

     Our  accounting  policies  are  more  fully described in Note 2 "Summary of
Significant  Accounting  Policies"  in  the "Notes to the Consolidated Financial
Statements,"  included  elsewhere  in  this  report.  We  have  identified  the
following  critical  accounting  policies:

-Inventory.  Raw  materials  consist  primarily  of green bean coffee.  Finished
goods  include  roasted  coffee,  tea,  accessory products, spices, and packaged
foods.  All  products  are  valued  at  the  lower  of  cost or market using the
first-in,  first-out  method,  except  green  bean  and roasted coffee, which is
valued  at  the  average  cost.  We  continually evaluate the composition of our
coffee  related  merchandise  and  mark  down  such  inventory  as  needed.  Our
historical  inventory  write-offs  have  been  immaterial.

-Intangibles  and  other  assets.  During  2002,  we  entered into a contractual
agreement  with  Safeway  Inc.,  a national grocery chain, to sell Peet's coffee
through  its grocery stores.  We began shipping during the third quarter of this
year.  The  agreement  included  an  upfront  payment  to  Safeway  Inc. that we
recorded  in  intangibles and other assets and is being amortized as a reduction
of  revenue  based  upon  estimated  sales  during  the  contract  period.

-Long-lived  assets.  In  evaluating  the  fair  value  and  future  benefits of
long-lived assets, we perform an analysis of the anticipated undiscounted future
net  cash  flows  of  the  related  long-lived  asset  and  reduce

                                       12
<PAGE>

their  carrying  value by the excess, if any, of the result of such calculation.
We  believe  at this time that the long-lived assets' carrying values and useful
lives  continue  to  be  appropriate.

-Accrued  compensation.  In  March  2002,  we modified our workers' compensation
insurance  policy to a high deductible insurance program with an overall program
ceiling to minimize exposure.  We began recording an estimated liability for the
self-insured  portion  of  the  workers'  compensation claims.  The liability is
determined  actuarially,  based  on  claims  paid,  filed  and reserved for, and
projected using an industry loss development factor, as well as using historical
experience  ratings.  As of December 29, 2002, the first 10 months of the policy
period,  we  had  $703,000  accrued for workers' compensation.  Should a greater
amount  of  claims  occur  compared  to  what  is estimated or the medical costs
increase  beyond  what  was  anticipated,  the  recorded  liability  may  not be
sufficient.

-Income  taxes.  We  have federal and state net operating loss carryforwards and
charitable  contribution  carryforwards.  The utilization of these carryforwards
is  dependent  on  future income.  We have established a valuation allowance for
the  portion of the carryforwards that we do not expect to utilize.  Although we
believe the valuation allowance is appropriate, if future taxable income were to
differ  significantly  from the amounts estimated, the valuation allowance would
need  to  be  adjusted.

-Hedge  accounting.  We  use coffee futures and options to hedge price increases
in  price-to-be-fixed  coffee  purchase  commitments  and  anticipated  coffee
purchases.  These  derivative  instruments qualify for hedge accounting which is
permitted  if  the  hedging  relationship  is  expected  to be highly effective.
Effectiveness  is determined by how closely the changes in the fair value of the
derivative  instrument  offset the changes in the fair value of the hedged item.
If  the  derivative is determined to qualify for hedge accounting, the effective
portion of the change in the fair value of the derivative instrument is recorded
in other comprehensive income and recognized in earnings when the related hedged
item  is  sold.  The  ineffective portion of the change in the fair value of the
derivative  instrument  is  recorded  directly to earnings.  If these derivative
instruments  did  not  qualify for hedge accounting, we would have to record the
changes  in  the  fair value of the derivative instruments directly to earnings.
See  "Item  7A.  Quantitative and Qualitative Disclosures about Market Risk" and
Note 12 "Hedging Activities" in the "Notes to Consolidated Financial Statements"
included  elsewhere  in  this  report.

     We have also chosen certain accounting policies when options are available,
including  the  intrinsic value method under APB Opinion No. 25, "Accounting for
Stock  Issued  to  Employees,"  to  account  for our stock option awards.  These
accounting  policies  are  applied  consistently  for  all years presented.  Our
operating  results  would  be  affected  if  other  alternatives  were  used.
Information  about  the impact on our operating results of using the alternative
of  SFAS No. 123, "Accounting for Stock-Based Compensation," is included in Note
2  "Summary  of  Significant  Accounting Policies" and Note 10 "Stock Option and
Employee  Purchase  Plans"  in the "Notes to Consolidated Financial Statements,"
included  elsewhere  in  this  report.

BUSINESS  SEGMENTS

     Our  coffee  and  related  items  are  sold  through  multiple  channels of
distribution  that are considered separate segments under Statement of Financial
Accounting  Standards  No. 131, "Disclosures About Segments of an Enterprise and
Related Information."  These channels provide broad market exposure to potential
purchasers  of  fresh roasted whole bean coffee.  Historically, we have operated
in  three  reportable  segments:  retail,  online  and  mail order and specialty
sales.  Management  evaluates segment performance primarily based on revenue and
segment  operating  income.  Effective at the beginning of the second quarter of
2002,  due  to  the  nature  of  cross-channel  marketing  and consumer purchase
behavior  from our multi-channel selling strategy, we have had an organizational
change,  combining  the  online  and  mail order segment and the specialty sales
segment.  We  are  indifferent  as  to  where consumers purchase our coffees and
teas,  so we have aggregated these individual sales channels into one reportable
segment.  Company-operated  retail  stores  operations remain a separate channel
due  to  the  beverage  component  of  this  business and the percent of overall
revenues  it represents.  Therefore, we have two reportable segments, consisting
of:

-     Our  retail  stores;  and
-     Specialty  sales,  which  consist  of  sales  to  online  and  mail  order
      customers,  and  sales  to  grocery  stores,  restaurant  and food service
      companies,  and  office  accounts.

                                       13
<PAGE>

     We believe growth opportunities exist in all these channels.  Our expansion
is  focused  first  in  developing  the  western  U.S. existing markets where we
already  have a presence and have a higher customer awareness.  We will continue
to  open  new stores in strategic locations that meet our demographic profile in
these markets, make our coffees more broadly and conveniently located in grocery
stores,  and  partner  with distributors and companies who share our passion for
quality  and  freshness  and  are willing and able to execute accordingly in the
food  service  and  office  environment.  We also will penetrate new markets and
channels  that we believe can support the sale of specialty coffee, and continue
to  explore  opportunities  internationally.

BUSINESS  CATEGORIES

     In  addition  to  our  reportable  segments,  we  measure  our  business by
monitoring  the  volume  and revenue growth of two distinct business categories:

-     Whole  bean  coffee  and  related  products;  and
-     Beverages  and  pastries.

     We  believe  these  business  categories  are  useful  in understanding our
results  of  operations  for the periods presented because we operate our stores
and  record  sales  through  these  two  categories.  Our  stores  are primarily
designed  to facilitate the sale of whole bean coffee.  The format of our stores
replicates  that of a specialty grocer. Beans are scooped from under the counter
bins,  weighed  on  counter  top  scales  and  hand  packed  into  branded bags.

     In addition, each store has a beverage bar that is dedicated to the sale of
prepared beverages and pastries.  Moreover, our two business categories within a
store  mature  at  different rates.  When we open a store, the initial sales are
primarily  beverage and pastry related.  The distance a consumer will travel, or
trade  area,  for  beverages  and pastries is short (usually one to three miles)
representing  a  convenience  purchase.  Consequently,  the  beverage and pastry
business  matures  rapidly.  The trade area for whole bean coffee is much larger
(usually  three  to  five miles), representing destination shopping.  Whole bean
sales  from  stores  mature  more  slowly  (typically  three  to  five  years).
Therefore,  sales  at  newer  stores  have  a  much  higher  beverage and pastry
component  and shift to a higher whole bean percentage as the store matures.  In
2002,  whole  bean coffee and related products sales from stores opened for less
than  5  years  was 41.9% of net revenue versus 50.9% for stores opened for more
than  5  years.  The dynamics of opening many new stores over the past few years
have resulted in a higher beverage and pastry percentage within our net revenue.

                                       14
<PAGE>

RESULTS  OF  OPERATIONS

     The  following  discussion  on  results  of  operations  should  be read in
conjunction  with  "Item  6.  Selected  Consolidated  Financial  Data,"  the
consolidated financial statements and accompanying notes and the other financial
data  included elsewhere in this report.  Our fiscal year is based on a 52 or 53
week  year.  The  fiscal  year  ends  on  the  Sunday closest to the last day of
December.

<TABLE>
<CAPTION>

                                                                     YEAR
                                                            ---------------------

                                                             2000    2001    2002
                                                            ------  ------  ------
<S>                                                         <C>     <C>     <C>
STATEMENT OF OPERATIONS DATA AS A PERCENT OF NET REVENUE:
Net revenue                                                 100.0%  100.0%  100.0%
Cost of sales and related occupancy expenses                 48.2    48.1    46.3
Operating expenses                                           33.3    32.4    31.9
Marketing and advertising expenses                            7.2     5.1     4.4
General and administrative expenses                           7.0     6.6     6.5
Depreciation and amortization expenses                        5.4     5.3     4.4
                                                            ------  ------  ------
Income (loss) from operations                                (1.1)    2.5     6.5
Interest income (expense), net                               (2.3)   (0.5)    0.5
                                                            ------  ------  ------
Income (loss) before income taxes                            (3.4)    2.0     7.0
Income tax (provision) benefit                                0.7    (0.8)   (2.6)
                                                            ------  ------  ------
Net income (loss)                                            (2.7)%   1.2%    4.4%
                                                            ======  ======  ======

PERCENT OF NET REVENUE BY BUSINESS SEGMENT:
Retail stores                                                81.0%   79.5%   75.2%
Specialty sales                                              19.0    20.5    24.8


PERCENT OF NET REVENUE BY BUSINESS CATEGORY:
Whole bean coffee and related products                       59.7%   59.3%   60.1%
Beverages and pastries                                       40.3    40.7    39.9


OPERATING EXPENSES AS A PERCENT OF SEGMENT REVENUE:
Retail stores                                                36.8%   35.5%   35.2%
Specialty sales                                              18.3    20.4    22.1

PERCENT INCREASE (DECREASE) FROM PRIOR YEAR:
Net revenue                                                          12.0%   10.2%
     Retail stores                                                    9.9     4.3
     Specialty sales                                                 51.5    33.2
Cost of sales and related occupancy expenses                         11.6     6.1
Operating expenses                                                    9.1     8.5
Marketing and advertising expenses                                  (20.7)   (5.4)
General and administrative expenses                                   5.9     7.8
Depreciation and amortization expenses                               10.1    (9.3)

SELECTED OPERATING DATA:
Number of retail stores in operation:
     Beginning of the period                                   53      58      60
     Stores openings                                            5       2       5
     Store closure                                              0       0       0
     End of the period                                         58      60      65

</TABLE>


                                       15
<PAGE>

2002  COMPARED  WITH  2001

Net  revenue

     Net  revenue  for 2002 increased by 10.2% for the two business segments and
categories  as  compared  to  2001.  During  2002,  we continued our strategy of
selling  through  multiple  channels  of  distribution.  A  key  element  of our
strategy  involves increasing the percentage of revenue from sales of whole bean
coffee  and  related products, which have a higher net margin than beverages and
pastries.  By  accelerating growth in the specialty sales segment, especially in
the  grocery  and  foodservice  channels, revenue derived from the sale of whole
bean  coffee  and  related  products  as a percent of net revenue increased from
59.3%  in  2001  to  60.1%  in  2002.

     In the retail segment, revenue increased 4.3% compared to 2001 primarily as
a  result  of  increased  sales in existing stores and the opening of new retail
stores.  The  $3.2  million  revenue  increase  consisted  of  $2.8 million from
existing  stores and $0.4 million from new stores.  The revenue increase of $2.0
million in existing stores was due to increased traffic and $0.8 million was due
to  higher average sales transactions.  There were no price increases during the
year.  During  2002,  we opened five new stores compared to two stores opened in
2001.  One  store  was  opened during the third quarter while the remaining four
stores were opened during the fourth quarter.  We opened more new stores in 2002
as  we  saw  the  cost  and availability of real estate become more favorable in
2002.  We  expect  to  open  approximately  8  new  stores  in  2003.

     In  the  specialty  sales segment, revenue increased primarily due to sales
initiatives  focused  in the grocery and foodservice channels.  The $6.4 million
revenue  increase  consists  of  $3.5  million  in  grocery,  $1.6  million  in
foodservice,  and  $1.3  million  in  all other channels such as online and mail
order,  kiosks  and  license partners, and office coffee sales.  The accelerated
growth  in  grocery  was  the  result  of  developing  relationships with larger
multi-location  chains  such  as  Safeway  Inc.  and  Whole  Foods  Markets.  We
increased  the number of grocery stores selling Peet's coffee from 130 locations
in  2001  to  over  1,400  in  2002.  In 2002, we entered into an agreement with
Safeway  to  distribute our coffees to approximately 1,200 Safeway stores across
the  country.  In  July  2002,  we  rolled out distribution to approximately 860
stores  in  the  western  United States, including California, Colorado, Pacific
Northwest, Arizona, and New Mexico.  In September, we rolled out distribution to
the  remaining  340  stores  in  the  eastern  United  States,  including Texas,
Illinois,  and  Pennsylvania.  We  expect to expand this sales effort to grocers
with similar profiles in the next few years.  In the foodservice area, the sales
increase  was  due  to  acquisition of new customers like the Omni Hotel and the
full  year impact of existing customers like Wolfgang Puck Fine Dining and Anton
Airfoods. In the other channels, including online and mail order, office coffee,
and kiosk operations, the sales increase was entirely attributable the full year
impact  of  our  kiosk  operations  in  Larry's  Markets.

Cost  of  sales  and  related  occupancy  expenses

     Cost  of  sales  and  related  occupancy expenses consist of product costs,
including  hedging  costs,  manufacturing costs, rent and other occupancy costs.
Primarily  as  a  result  of  increased net revenue and the addition of five new
stores,  cost  of sales increased by 6.1% in 2002.  As a percent of net revenue,
cost  of  sales  decreased  mainly  because  of  lower coffee costs, lower world
commodity coffee prices and the sales of special lot and seasonal coffees, which
have  a  higher margin than regular menu coffees.  These benefits were partially
offset  by the increase in revenue from the specialty sales segment, which has a
lower  price  point  than  retail  and  higher  shipping  and  packaging  costs.

Operating  expenses

     Operating  expenses  for  2002 increased as compared to 2001 as we grew our
business.  However,  operating  expenses  as  a percent of net revenue decreased
primarily  due  to  the  continued  productivity initiative affecting our retail
stores  and the revenue increase in our specialty sales segment, which has lower
operating  expenses  without the intensive labor component of the retail stores.
Our focus on growing the specialty sales segment led to an increase in specialty
sales  operating  expenses  as  a  percent  of  segment  revenue.  The  factors
contributing  to  the  increase  included  the continued upgrade and addition of
sales  staff and an increase in consulting and distribution costs in the grocery
channel.  We  hired  a  sales brokerage firm to aide us in selling coffee in the
grocery  channel.  Further,  distribution  expenses  have  increased  as we have
dedicated  DSD  route  sales  representatives  delivering our product to grocery
stores  weekly,  including  the  associated commission and vehicle expenses.  We
expect  to  have  approximately  50  DSD route sales representatives in 2003, of
which  approximately  30  will  be  full-time  Peet's  employees, to support the
expansion  into  grocery stores in the western United States as well as existing
accounts,

                                       16
<PAGE>

such  as  Safeway and Whole Foods Markets.  The related operating expenses, such
as  commissions  and  vehicle  expenses,  are  expected to increase, however, we
believe  the  increased revenue will positively offset these expenses over time.

Marketing  and  advertising  expenses

     We  believe  the  decrease in marketing and advertising expenses in 2002 as
compared  to  2001  is attributable to the leverage gained from marketing across
multiple  channels  of distribution, as well as the shift in spending to improve
stores  operations,  recognizing  stores  are  our most valuable marketing tool.

General  and  administrative  expenses

     General and administrative expenses increased by 7.8% in 2002 as the result
of  higher  expenses in the areas of stock plan administration, public relations
and  proxy  related  activities,  higher  insurance  coverage  for directors and
officers,  and  our  CEO  search.

Depreciation  and  amortization  expenses

     Depreciation  and  amortization expenses decreased in 2002 due primarily to
certain  assets  becoming fully depreciated during the year.  In addition, while
we  opened  3  more  stores  than  last year, depreciation expense was minimally
impacted  as  most  of  the  stores  were  opened  in  the  fourth  quarter.

Interest  (income)  expense,  net

     Net  interest  income  was  generated  in  2002  from the investment of the
proceeds of our secondary offering in April 2002.  The investments are short and
long  term  interest  bearing,  U.S.  Government  and  Agency  securities.

Income  tax  provision

     Taxes  on net income in 2002 were $2.7 million, reflecting an effective tax
rate  of  37.0%.  The  decrease  in  the  effective  rate over the prior year is
attributable  to  the  change  in  the  valuation  allowance  of  charitable
contributions  carryforwards.

2001  COMPARED  WITH  2000

Net  revenue

     Net  revenue for 2001 increased 12.0% as compared to 2000.  Revenue derived
from  the  sale  of  whole  bean coffee and related products as a percent of net
revenue  actually decreased slightly in 2001 from 59.7% to 59.3%, primarily as a
result  of  the  opening  of  eighteen  retail stores over the past three years.

     In the retail segment, revenue increased primarily as a result of increased
sales in existing stores, price increases on whole bean coffee and beverages and
pastries  effective  in  December 2000, the opening of new retail stores and the
introduction  of a line of high-end reserve coffees.  During 2001, we opened two
new  stores  compared  to  five  stores opened in 2000.  One was in Studio City,
Southern  California,  and the other was in Wellesley, Massachusetts.  We opened
fewer  new  stores  in 2001 because the cost and availability of real estate was
less  attractive  during  2000  and  the  first  half  of  2001.


                                       17
<PAGE>

     The  following table sets forth the sources of revenue increases in 2001 by
business  category  for  the  retail  segment  (in  millions).

<TABLE>
<CAPTION>


<S>                                                      <C>
Increased volume and change in mix of whole bean coffee  $1.5
Price increase in December 2000                           0.8
                                                         ----
     Total existing stores                                2.3
     Total new stores                                     0.4
                                                         ----
Total whole bean coffee and related products             $2.7
                                                         ====

Increased volume of beverages and pastries               $2.2
Price increase in December 2000                          $1.3
                                                         ----
     Total existing stores                               $3.5
     Total new stores                                    $0.5
                                                         ----
Total beverages and pastries                             $4.0
                                                         ====
</TABLE>


     In  the  specialty  sales segment, revenue increased 21.0% primarily due to
increases from the grocery and online and mail order channels.  The $3.4 million
increase  consisted  of  $1.2 million increase in sales to online and mail order
customers,  $0.8 million in incremental sales to specialty groceries and gourmet
food  stores,  $0.6  million in sales to restaurants and food service companies,
and  $0.8  million  in  additional  sales  to office accounts and Larry's Market
kiosks.  In the online and mail order channel, our marketing efforts resulted in
a  13.2%  increase  in  active customer during 2001.  In the grocery channel, we
increased  the  number  of  specialty grocery and gourmet food stores from 25 in
2000 to over 130 in 2001, including multi-location chains such as Von's Pavilion
and  Beverages &more!.  In the restaurant and food service area, we entered into
agreements  with  companies  such  as The Wolfgang Puck Fine Dining and Catering
Group  and  Anton Airfoods.  We also began operations of 6 kiosks within Larry's
Markets,  a  specialty  grocery  chain  in  Seattle.

Cost  of  sales  and  related  occupancy  expenses

     Cost of sales increased by 11.9% in 2001 primarily as a result of increased
net  revenue  and  the addition of two new stores.  The lower cost of green bean
coffee  was  partially  offset  by higher hedging costs.  Cost of sales actually
decreased  as  a  percent  of  net  revenue  mainly  because  of:

-     The  December 2000 price increase, which resulted in a higher average sale
      at  our  retail store  beverage bars and a higher price per pound of whole
      bean  coffee purchased  at  our retail stores and by online and mail order
      customers;
-     Sales of high-end reserve coffees, which have a higher margin than regular
      menu  coffees;  and
-     Fewer  new  stores  opened  during  2001.

     These  benefits  were  partially offset by the increase in revenue from the
specialty  sales segment, which has a lower price point than retail and a higher
shipping  cost.

Operating  expenses

Operating  expenses  as  a percent of net revenue decreased primarily due to the
increase  in  our  net  revenue,  a  more  favorable  hiring  environment, and a
productivity  improvement initiative affecting our retail stores.  This included
programs  to  increase  efficiency in our bar operations and a more standardized
scheduling  practice.

     Our  focus  on  growing  the  specialty sales segment led to an increase in
specialty sales operating expenses as a percent of segment revenue.  The factors
contributing to the increase included the payroll expense of new sales staff for
the  grocery  segment expansion, their travel and related expenses, the expenses
related  to  distribution,  and the pre-opening and startup costs related to the
opening  of  kiosks  in Larry's Markets stores in Seattle.  These increases were
partially  offset by decreases in payroll, order processing and outside services
expenses  in  the  online  and  mail  order  channel.

                                       18
<PAGE>

Marketing  and  advertising  expenses

     The  decrease  in marketing and advertising expenses in 2001 as compared to
2000  is  attributable  to  the  leverage  gained from marketing across multiple
channels  of  distribution,  a  shift  from  customer  acquisition  to  customer
retention,  which is generally more cost effective, and fewer new store openings
in  2001.

General  and  administrative  expenses

     We were able to reduce our general and administrative expenses as a percent
of  net  revenue in 2001 as compared to 2000 primarily by maintaining prior year
employee  base levels and lowering recruiting expenses in a less-competitive job
market.  Our  efforts  to  reduce  general  and  administrative  expenses  were
partially  offset  by  higher  outside  services  expenses related to stock plan
administration  and public relations activities associated with being a publicly
held  company.

Depreciation  and  amortization  expenses

     Depreciation  and  amortization  expenses  increased in 2001 as compared to
2000  due  to  the  openings  of  new  stores  and  kiosks  and  investments  in
manufacturing and systems.  However, as a percent of net revenue, these expenses
decreased  compared to the prior year primarily due to fewer stores being opened
as  well  as  the  increase in revenue from the less capital-intensive specialty
sales  channel.

Interest  expense,  net

     Net  interest  expense decreased in 2001 as compared to 2000 as a result of
repayment  of  debt  using  the net proceeds from our initial public offering in
January  2001.

Income  tax  provision  (benefit)

     Taxes  on net income in 2001 were $0.7 million, reflecting an effective tax
rate  of  39.3%.  The  increase  in  the  effective  rate over the prior year is
attributable to the increase in income and the change in the valuation allowance
of  charitable  contributions  carryforwards.

LIQUIDITY  AND  CAPITAL  RESOURCES

     At  December  29,  2002, we had $19.7 million in cash and cash equivalents,
invested  in  U.S.  Government  and Agency securities, and $22.5 million working
capital.

     Net  cash provided by operations was $11.8 million in 2002 compared to $5.8
million  in  2001.  Operating  cash  flows  were  positively impacted in 2002 by
increased  net  income and higher accounts payable and accrued liabilities.  The
increase  was  partially offset by an increase in green coffee bean inventory as
we  increased  our  purchases  in response to historically low coffee prices and
potential  longshoremen  lockout  in  the  West  Coast.

     Net cash used in investing activities was $37.2 million in 2002.  Investing
activities  primarily  consisted  of  the purchase of $27.9 million of long term
U.S.  Government and Agency securities, and $9.3 million in capital expenditures
for  property,  plant  and  equipment.  Capital  expenditures  included:

-     $4.9  million  used for the buildout of new stores and remodel of existing
      stores;
-     $1.9 million used for information technology support systems, and software
      to  support  our  growing  infrastructure;
-     $1.0  million  used  for  kiosks  and  equipment  for  specialty  sales;
-     $1.2  million  used  for  manufacturing  plant  capacity  and  additional
      machinery;  and
-     $0.3  million  for  various  projects  in  progress.

     Net  cash  provided  by  financing  activities  was  $42.4 million in 2002.
Financing  activities  in  2002  consisted  primarily  of  $44.9  million in net
proceeds  received  from  our secondary public offering in April and exercise of
stock  options,  partially  offset  by  $2.5  million  of  repayment  of  debt.

                                       19
<PAGE>

     We  have  a credit facility with General Electric Capital Corporation, that
provides  for  a revolving line of credit of $15.0 million that expires in 2005.
At  December  29,  2002,  there  was  no  outstanding  balance and $14.1 million
available  under  the revolving line of credit after other senior funded debt of
$0.9  million,  consisting  of  industrial development revenue bonds and capital
leases.

     Due  to  the  significant  repayment  of  debt from the net proceeds of our
initial  public  offering,  we amended our existing credit facility in June 2001
and  March  2002 (effective December 24, 2001), December 2002 (effective October
1,  2002), and February 2003 (effective December 1, 2002) to reflect our updated
cash and capital requirements.  The March 2002, December 2002, and February 2003
amendments  include an increase in the capital expenditure limit, an increase in
the  number  of  new  stores  per  year,  and  a relaxation of certain financial
covenants.  In  addition,  interest  rates  on the revolving line of credit have
been reduced.  We were in compliance with all financial covenants as of December
29,  2002.  See  Note  6  "Borrowings"  in  the "Notes to Consolidated Financial
Statements,"  included  elsewhere  in  this  report.

     Our 2003 capital expenditure requirements consist primarily of expenditures
relating  to  new  store openings, remodeling of existing stores, upgrade of our
packaging system, and continued improvement of our data processing capabilities.
Our 2003 capital expenditures are expected to be between $9.0 and $10.0 million.
Approximately  $5.0  million is expected to be used for the opening of eight new
retail stores scheduled for 2003 and expenditures for new stores in progress for
2004.  Approximately  $2.0  million  is  expected to be used for purchase of new
packaging  equipment.  The remaining $2.5 million is expected to be used for the
remodeling  of  existing  stores,  equipment  for  the  grocery  channel,  and
information  technology  enhancements.

<TABLE>
<CAPTION>


                                          PAYMENTS DUE BY PERIOD
                                              (IN THOUSANDS)
                                         ------------------------
                                                                   LESS THAN
CONTRACTUAL OBLIGATIONS                           TOTAL              1 YEAR    1-3 YEARS   4-5 YEARS   AFTER 5 YEARS
---------------------------------------  ------------------------  ----------  ----------  ----------  --------------
<S>                                      <C>                       <C>         <C>         <C>         <C>
Industrial development revenue bonds     $                    860  $      440  $      420
Capital lease obligations                                      32          28           4
Equipment leases                                               87          17          35  $       35
Retail store operating leases                              23,915       5,083       9,071       5,980  $        3,781
Fixed-price coffee purchase commitments                    18,149      12,018       5,842         289
                                         ------------------------  ----------  ----------  ----------  --------------
     Total contractual cash obligations  $                 43,043  $   17,586  $   15,372  $    6,304  $        3,781
                                         ========================  ==========  ==========  ==========  ==============
</TABLE>

     In addition, as of December 29, 2002, we have an outstanding standby letter
of  credit  of  $0.9  million  backing  the  long-term  borrowings.

     We  expect  cash flows from operations, cash and investments, and borrowing
capacity  under  our  current  line of credit to be sufficient for our operating
requirements  for  at  least  the next twelve months and to meet our contractual
obligations  as  they  come  due.  However,  we may require or desire additional
funds  to  support  our  capital  requirements  or  for  other purposes, such as
acquisitions  or  for competitive reasons, and may seek to raise such additional
funds through public or private debt or equity financings.  We cannot assure you
that  additional  financing  will be available on satisfactory terms, if at all.
Our  future  liquidity  and  cash  requirements will depend on numerous factors,
including  the  implementation and success of our business strategy, competitive
conditions  in  the  specialty  coffee  market, and general economic conditions.
Please  see  "Risk  Factors" below for a discussion of the risks that may affect
our  revenue  and  operations.

INFLATION

     We  do  not believe that inflation has had a material impact on our results
of  operation in recent years.  However, we cannot predict what effect inflation
may  have  on  our  results  of  operation  in  the  future.

                                       20
<PAGE>

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     We  are  exposed  to  market  risk  from  changes  in interest rates on our
outstanding  bank  debt.  Our revolving line of credit bears interest at certain
applicable  margin  levels  contingent  upon  our  leverage ratio on a quarterly
basis.  The  interest  rate, which is either the Index rate (the higher of prime
or  50  basis  points  over  the  average  of  rates for overnight federal funds
transactions)  plus  a range from 0.00% to 0.25% or a rate equal to LIBOR plus a
range  from  2.00%  to  2.50%,  increases  as  our  leverage  ratio  increases.
Adjustments  to  the  applicable  margin  level  are  implemented quarterly on a
prospective basis.  The interest cost of our bank debt is affected by changes in
either  prime,  federal  funds  rates,  or  LIBOR.  Such changes could adversely
impact  our  cost  of  borrowing.

     The  supply  and  price of coffee are subject to significant volatility and
can  be  affected  by  multiple  factors  in  the producing countries, including
weather,  political  and  economic  conditions.  In  addition, green coffee bean
prices have been affected in the past, and may be affected in the future, by the
actions  of  certain  organizations  and  associations  that  have  historically
attempted to influence commodity prices of green coffee beans through agreements
establishing  export  quotas  or  restricting  coffee  supplies  worldwide.

     Our  hedging  strategy  is  intended to limit the cost exposure of the main
commodity  used  in  our  business,  green  coffee  beans.  We use the following
instruments  to  manage  coffee  supply  and  price  risk:

-     Fixed-price  purchase  commitments;
-     Coffee  futures;  and
-     Coffee  futures  options.

     We  use  coffee futures and coffee futures options to reduce the price risk
of  our  coffee  purchase requirements that we cannot make or have not made on a
contractual  basis.  These  coffee futures and coffee futures options are traded
on the New York Coffee, Sugar &Cocoa Exchange.  We use these futures and options
solely  for  financial  hedging  purposes  and never take actual delivery of the
coffee  traded  on  the  exchange.

   Fixed-Price  Purchase  Commitments

     We  enter  into  fixed-price  purchase  commitments  in  order to secure an
adequate  supply  of quality green coffee beans and fix our cost of green coffee
beans.  These  commitments  are  made  with  established  coffee brokers and are
denominated  in  U.S.  dollars.  As  of  December 29, 2002, we had approximately
$18.1  million  in  open  fixed-priced  purchase commitments with delivery dates
ranging  from  January  2003  through  November  2006.  We  believe,  based  on
relationships  established  with  our  suppliers  in  the past, that the risk of
non-delivery  on  such  purchase  commitments  is  low.

   Coffee  Futures

     A coffee future is a contract to buy 37,500 pounds of green coffee beans at
a  contracted  price  and  date.  The  price of coffee traded on the exchange is
known  as  the  New  York  "C"  market price.  We buy higher-quality coffee that
trades  at  premiums  to  the  New York "C" market price.  Although this premium
varies  depending  on  the supply and demand at the time of purchase, generally,
the  price  of  the  coffee we purchase tends to fluctuate with the New York "C"
market  price.  This  allows us to use coffee futures and coffee futures options
to  manage  our  exposure  to  price  fluctuations.

     We use coffee futures to hedge the price of anticipated coffee purchases to
achieve  a  target  gross  margin  for  roasted  coffee.  We convert this margin
requirement into an equivalent New York "C" market price for green coffee beans,
which  we  call  our  "threshold."

     When  the  current New York "C" market price is below our threshold, we may
purchase  coffee  futures  to  fix  the  cost of our anticipated needs.  Once we
contract  to  purchase  coffee  from  the supplier at a fixed price, we sell the
related  future.  If market prices decline, we forego potential additional gross
margin  and incur potential cash margin calls.  However, we are comfortable with
this  cost  structure  and  enjoy  the  security  of  reduced  risk.

                                       21
<PAGE>

   Coffee  Futures  Options

     When  the  current New York "C" market price is above our threshold, we may
purchase  coffee  futures options to limit the cost exposure for our anticipated
needs.

     A  coffee  futures option is an option to buy a coffee future at a specific
price,  known  as  a  "trade  price."  The  cost  of  the option is based on the
relationship  of  the  trade  price  to  the  current New York "C" market price.

     When  we  commit to purchase a specified quantity of green coffee beans and
do not fix a price, we will hedge this ''not-yet-priced'' purchase commitment by
purchasing  a  coffee  futures  option.  This  coffee  futures option locks in a
specific  price for the not-yet-priced purchase commitment but does not obligate
us to take delivery on the contract.  If market prices rise, we realize gains on
the coffee futures option, which offset the increase in price we have to pay for
the  coffee beans.  If the market prices decline, we will set the contract price
of  the  not-yet-priced  purchase commitment at the market price and we will let
the  option  expire,  taking  advantage  of  the  declining  market.

     We  also  use coffee futures options to hedge anticipated coffee purchases.
When  the  current  New  York  ''C'' market price is above our threshold, we may
purchase  coffee  futures  options  to  limit  the  risk that coffee prices will
continue  to  rise.  If  market  prices  rise,  the  higher prices of our future
fixed-price  coffee  commitments  will  be  offset by gains from the option.  If
market  prices decline, our future fixed-price coffee commitments will be set at
lower  prices  and  the  option will expire resulting in no further liability or
obligation.

     The  extent  of  our coffee futures and coffee futures options positions at
any  given  time  depends on the amount of coffee we have contracted to purchase
and general market conditions and trends.  We anticipate continuing this hedging
strategy  for  the  foreseeable  future.

     We  held  no  coffee futures options as of December 29, 2002 and we did not
enter  into  any  coffee  futures  options  during  2002  or  2001.

     Our  hedging  positions  are  only  placed  by  the Chief Financial Officer
through  one  brokerage  firm  that  we  believe  to  be  reputable.

     The  following  table  reflects  the  outstanding  coffee  futures  hedging
positions  as  of  December  29,  2002  and  December  30,  2001.

<TABLE>
<CAPTION>



<S>                  <C>                                        <C>       <C>     <C>          <C>
                                                                CONTRACT  TRADE   SETTLEMENT
NUMBER OF CONTRACTS                                             MONTH     PRICE   PRICE        GAIN/(LOSS)
-------------------                                             --------  ------  -----------  ------------

25                                                              May-03    $60.50        63.85  $    31,410
                                                                                               ------------
                     Unrealized Gain as of December 29, 2002                                   $    31,410
                                                                                               ============

25                                                              May-02    $60.10  $     48.15  $  (112,031)
                                                                                               ------------
                     Unrealized (Loss) as of December 30, 2001                                 $  (112,031)
                                                                                               ============
</TABLE>

     These  derivative  instruments qualify for hedge accounting.  The effective
portion  of  the  gains  and losses are accounted for as inventory costs and are
recorded  as expense or income when the related coffee is sold.  The ineffective
portion  is  recorded  as  an  expense or income immediately.  We do not hold or
issue  derivative  instruments  for  trading  purposes.

                                       22
<PAGE>

RECENT  ACCOUNTING  PRONOUNCEMENTS

     In  October  2001, the Financial Accounting Standards Board, (FASB), issued
SFAS  No.  144,  Accounting for the Impairment or Disposal of Long-Lived Assets.
This  statement  supercedes  SFAS  No.  121,  Accounting  for  the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to  be  Disposed  Of,  and the
accounting  and reporting provision of APB Opinion No. 30, Reporting the Results
of  Operations - Reporting the Effects of Disposal of Segment of a Business, and
Extraordinary,  Unusual  and Infrequently Occurring Events and Transactions, for
the  disposal  of  a  segment of business. SFAS No. 144 became effective for the
Company  on December 31, 2001. Adoption of this standard did not have a material
effect  on  the  Company's  financial  position  or  results  of  operations.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with  Exit  of Disposal Activities, which addresses accounting for restructuring
and  similar  costs.  SFAS  No.  146  supersedes  previous  accounting guidance,
principally  Emerging  Issues  Task Force Issue No. 94-3. The Company will adopt
the  provision  of  SFAS  No.  146  for restructuring activities initiated after
December  31,  2002.  SFAS  No. 146 requires that liability for costs associated
with  an exit or disposal activity be recognized when the liability is incurred.
Under  Issue  94-3,  a liability for an exit cost is recognized at the date of a
company's  commitment  to  an  exit plan. SFAS No. 146 also establishes that the
liability  should initially be measured and recorded at fair value. Accordingly,
SFAS  No. 146 may affect the timing of recognizing future restructuring costs as
well  as  the  amounts  recognized.

     In  November  2002,  the  FASB  issued  FASB Interpretation ("FIN") No. 45,
Guarantor's  Accounting  and  Disclosure  Requirements for Guarantees, Including
Indirect  Guarantees  of  Indebtedness  of  Others.  FIN  45  elaborates  on the
disclosures  to  be  made  by  the guarantor in its interim and annual financial
statements  about  its  obligations under certain guarantees that it has issued.
It  also requires that a guarantor recognize, at the inception of a guarantee, a
liability  for  the  fair  value  of  the  obligation  undertaken in issuing the
guarantee.  The  initial  recognition  and  measurement  provisions  of  this
interpretation  are  applicable  on  a prospective basis to guarantees issued or
modified  after  December  31,  2002;  while,  the  provisions of the disclosure
requirements are effective for financial statements of interim or annual periods
ending  after  December 15, 2002.  The adoption of the measurement provisions of
FIN  45  is  not expected to have a material impact on our financial position or
results  of  operations.

RISK  FACTORS

WE  MAY  NOT BE SUCCESSFUL IN THE IMPLEMENTATION OF OUR BUSINESS STRATEGY OR OUR
BUSINESS  STRATEGY MAY NOT BE SUCCESSFUL, EITHER OF WHICH WILL IMPEDE OUR GROWTH
AND  OPERATING  RESULTS.

     Our  business  strategy  emphasizes  the  expansion  of  our  non-retail
distribution  channels  -  including  grocery stores, online and mail order, and
office, restaurant and food service accounts.  This business strategy represents
a  shift  from  our historic business strategy, which largely emphasized opening
and  operating  retail  stores.  Despite  the change in our strategy, our retail
stores,  which  generated  nearly 75% of our 2002 net revenue, continue to be an
important  element  of  our business.  We do not know whether we will be able to
successfully  implement  our  business strategy or whether our business strategy
will  be  successful.  Our  ability  to  implement  this  business  strategy  is
dependent  on  our  ability  to:

-     Market  our  products  on  a  national or international scale and over the
      internet;
-     Enter  into distribution and other strategic arrangements with third party
      retailers  and  other  potential  distributors  of  our  coffee;
-     Increase  our  brand  recognition  on  a national and international scale;
-     Identify  and  lease  strategic  locations  suitable  for  new stores; and
-     Manage  growth in administrative overhead and distribution costs likely to
      result  from  the  planned  expansion  of  our  retail  and non-retail
      distribution  channels.

     Our  revenue may be adversely affected if we fail to implement our business
strategy or if we divert resources to a business strategy that ultimately proves
unsuccessful.

                                       23
<PAGE>

BECAUSE  OUR  BUSINESS IS CENTERED ON A SINGLE PRODUCT, SPECIALTY COFFEE, IF THE
DEMAND  FOR  SPECIALTY  COFFEE  DECREASES,  OUR  BUSINESS  COULD  SUFFER.

     Sales  of specialty coffee constituted nearly  83% of our 2002 net revenue.
Demand  for  specialty  coffee  is  affected  by  many  factors,  including:

-     Consumer  tastes  and  preferences;
-     National,  regional  and  local  economic  conditions;  and
-     Demographic  trends.

     Because  we are highly dependent on consumer demand for specialty coffee, a
shift in consumer preferences away from specialty coffee would harm our business
more  than if we had more diversified product offerings.  If customer demand for
specialty  coffee  decreases,  our  sales  would  decrease  accordingly.

IF  WE  FAIL  TO  CONTINUE TO DEVELOP AND MAINTAIN OUR BRAND, OUR BUSINESS COULD
SUFFER.

     We  believe  that  maintaining  and developing our brand is critical to our
success and that the importance of brand recognition may increase as a result of
competitors  offering  products  similar  to  ours.  Because the majority of our
retail  stores are located on the west coast, primarily in California, our brand
recognition  remains  largely  regional.  Our brand building initiative involves
increasing  the  availability of our products, increasing marketing expenditures
and  opening new stores in flagship locations to increase awareness of our brand
and  create  and  maintain  brand  loyalty.  If our brand building initiative is
unsuccessful,  we  may  never  recover  the expenses incurred in connection with
these  efforts  and we may be unable to increase our future revenue or implement
our  business  strategy.

     Our success in promoting and enhancing the Peet's brand will also depend on
our  ability  to  provide  customers  with  high  quality  products and customer
service.  Although  we  take  measures to ensure that we sell only fresh roasted
whole bean coffee and or retail employees properly prepare our coffee beverages,
we  have  no  control  over  our  whole  bean  coffee products once purchased by
customers.  Accordingly, customers may prepare coffee from our whole bean coffee
inconsistent with our standards, store our whole bean coffee for long periods of
time  or  resell  our whole bean coffee without our consent, which in each case,
potentially  affects  the  quality of the coffee prepared from our products.  If
customers  do  not perceive our products and service to be of high quality, then
the  value  of  our  brand  may  be diminished and, consequently, our ability to
implement  our  business  strategy  may  be  adversely  affected.

BECAUSE  OUR  BUSINESS IS BASED PRIMARILY IN CALIFORNIA, A WORSENING OF ECONOMIC
CONDITIONS,  A  DECREASE  IN  CONSUMER  SPENDING  OR A CHANGE IN THE COMPETITIVE
CONDITIONS  IN  THIS  MARKET  MAY  SUBSTANTIALLY  DECREASE  OUR  REVENUE AND MAY
ADVERSELY  IMPACT  OUR  ABILITY  TO  IMPLEMENT  OUR  BUSINESS  STRATEGY.

     Our  California  retail  stores generated 67% of our 2002 net revenue and a
substantial  portion  of  the  revenue  from  our other distribution channels is
generated in California.  We expect that our California operations will continue
to  generate  a substantial portion of our revenue.  In addition, our California
retail  stores  provide  us  with means for increasing brand awareness, building
customer loyalty and creating a premium specialty coffee brand.  As a result, an
economic  downturn  or other decrease in consumer spending in California may not
only  lead  to  a substantial decrease in revenue, but may also adversely impact
our  ability to market our brand, build customer loyalty, or otherwise implement
our  business  strategy.

IF  WE  ARE UNABLE TO CONTINUE LEASING OUR RETAIL LOCATIONS OR OBTAIN LEASES FOR
NEW  STORES,  OUR EXISTING OPERATIONS AND OUR ABILITY TO EXPAND MAY BE ADVERSELY
AFFECTED.

     All of our 68 retail locations are on leased premises.  If we are unable to
renew  these  leases,  our  revenue  and  profits could suffer.  In addition, we
intend  to  lease other premises in connection with the planned expansion of our
retail  operations.  Because we compete with other retailers and restaurants for
store sites and some landlords may grant exclusive locations to our competitors,
we  may  not be able to obtain new leases or renew existing leases on acceptable
terms.  This  could  adversely  impact  our  revenue  growth  and brand building
initiatives.

                                       24
<PAGE>

THE  DIRECT  STORE  DELIVERY  SYSTEM  HAS SIGNIFICANT START UP COSTS AND ONGOING
OPERATING  EXPENSES  AND  OUR  PROFIT  MARGIN  COULD  BE  ADVERSELY  IMPACTED IF
CORRESPONDING  NET  REVENUE  DOES  NOT  MATERIALIZE.

     We implemented a direct store delivery sales and distribution system during
the  fourth  quarter of 2002 to support growth in the grocery area and to ensure
store  level  execution  is  being  managed  to  our standards.  This DSD system
requires  our route sales representatives to make weekly deliveries to stores in
our  own  trucks,  properly  shelve  the  product,  work  to  resolve  pricing
discrepancies,  rotate  to  ensure  freshness,  sell  and  erect  free-standing
displays,  and  forge  store-level selling relationships.  The deployment of the
DSD system has substantial startup and continuing fixed costs which we expect to
be  offset  by  significant  revenue  increase  over time. If we are not able to
increase  the  expected number of grocery accounts and/or related net revenue to
support  the  expenses  we  have incurred and will continue to incur, this could
adversely  impact  our  profit  margin.

BECAUSE  WE RELY HEAVILY ON COMMON CARRIERS TO SHIP OUR COFFEE ON A DAILY BASIS,
ANY  DISRUPTION  IN THEIR SERVICES OR INCREASE IN SHIPPING COSTS COULD ADVERSELY
AFFECT  OUR  BUSINESS.

     We  rely  on a number of common carriers to deliver coffee to our customers
and  retail stores.  We consider roasted coffee a perishable product and we rely
on  these  common carriers to deliver fresh roasted coffee on a daily basis.  We
have no control over these common carriers and the services provided by them may
be  interrupted  as  a  result  of  labor  shortages, contract disputes or other
factors.  If  we  experience an interruption in these services, we may be unable
to  ship  our  coffee  in  a  timely  manner.  A  delay  in  shipping  could:

-     Have  an  adverse impact on the quality of the coffee shipped, and thereby
      adversely  affect  our  brand  and  reputation;
-     Result in the disposal of an amount of coffee that could not be shipped in
      a  timely  manner;  and
-     Require  us  to  contract  with  alternative, and possibly more expensive,
      common  carriers.

     Any  significant  increase in shipping costs could lower our profit margins
or  force  us  to  raise  prices,  which  could cause our revenue and profits to
suffer.

WE  DEPEND  ON  THE  EXPERTISE  OF KEY PERSONNEL.  IF THESE INDIVIDUALS LEAVE OR
CHANGE  THEIR  ROLE  WITHIN  OUR  COMPANY  WITHOUT  EFFECTIVE  REPLACEMENTS, OUR
OPERATIONS  MAY  SUFFER.

     The  success  of  our  business  is  dependent  to  a  large  degree on our
management and our coffee roasters and purchasers.  If members of our management
leave  without  effective  replacements,  our  ability to implement our business
strategy  could be impaired.  If we lost the services of our coffee roasters and
purchasers,  our  ability  to  source  and  purchase a sufficient supply of high
quality  coffee  beans  and  roast  coffee  beans  consistent  with  our quality
standards  could  suffer.  In  either case, our business and operations could be
adversely  affected.

WE  MAY  NOT BE ABLE TO HIRE OR RETAIN ADDITIONAL MANAGEMENT AND OTHER PERSONNEL
AND OUR RECRUITING AND TRAINING COSTS MAY INCREASE AS A RESULT OF TURNOVER, BOTH
OF  WHICH MAY INCREASE OUR COSTS AND REDUCE OUR PROFITS AND MAY ADVERSELY IMPACT
OUR  ABILITY  TO  IMPLEMENT  OUR  BUSINESS  STRATEGY.

     The  success of our business depends upon our ability to attract and retain
highly  motivated,  well-qualified  management  and  other  personnel, including
technical  personnel  and  retail employees.  We face significant competition in
the  recruitment  of  qualified  employees.  Our ability to execute our business
strategy  may  suffer  if:

-     We  are  unable  to  recruit  or  retain  a sufficient number of qualified
      employees;
-     The  costs of employee compensation or benefits increase substantially; or
-     The  costs  of outsourcing certain tasks to third party providers increase
      substantially.

     We  expend  significant  resources  in  training  our  retail  managers and
employees.  During the past few years, retail employee turnover has increased to
approximately  75%  per  year.  If  turnover continues to increase, we may incur
additional  recruiting  and  training  costs.

                                       25
<PAGE>

BECAUSE  WE  HAVE  ONLY ONE ROASTING FACILITY, A SIGNIFICANT INTERRUPTION IN THE
OPERATION  OF  THIS  FACILITY  COULD  POTENTIALLY  DISRUPT  OUR  OPERATIONS.

     We  have only one coffee roasting and distribution facility.  A significant
interruption in the operation of this facility, whether as a result of a natural
disaster  or other causes, could significantly impair our ability to operate our
business  on  a  day-to-day  basis.  Moreover,  our  roasting  and  distribution
facility  and  most  of  our  stores  are  located near several major earthquake
faults.  The  impact of a major earthquake on our facilities, infrastructure and
overall  operations  is  difficult  to predict and an earthquake could seriously
disrupt  our  entire  business  process.

     Our  earthquake  insurance  covers  net income, continuing normal operating
expenses  and extra expenses incurred during the period of restoration. However,
in  the event of a catastrophic earthquake, our coverage is limited and we would
incur  additional  expenses.

INCREASES  IN  THE  COST  OF  HIGH QUALITY ARABICA COFFEE BEANS COULD REDUCE OUR
GROSS  MARGIN  AND  PROFIT.

     Coffee  is  a  trade  commodity  and,  in  general, its price can fluctuate
depending  on:

-     Weather  patterns  in  coffee-producing  countries;
-     Economic  and  political  conditions affecting coffee-producing countries;
-     Foreign  currency  fluctuations;  and
-     The  ability  of  coffee-producing  countries  to  agree to export quotas.

     Coffee  prices  are  currently near historical lows and we believe they are
likely  to  increase  in  the  future.  If  the  cost  of our green coffee beans
increases due to any of these or other factors, we may not be able to pass along
those  costs to our customers because of the competitive nature of the specialty
coffee  industry.  If  we  are  unable to pass along increased coffee costs, our
margins  will  decrease  and  our  profitability  will  suffer  accordingly.  In
addition,  our  hedging  policy  may  not be effective in controlling our coffee
costs  and the brokers with whom we have fixed price coffee purchase commitments
may  not  deliver under those commitments.  In either case, our coffee costs may
increase  and  our  profitability  may  suffer.

DECREASED  AVAILABILITY  OF  HIGH QUALITY ARABICA COFFEE BEANS COULD RESULT IN A
DECREASE  IN  REVENUE  AND  JEOPARDIZE  OUR  ABILITY  TO  EXPAND  OUR  BUSINESS.

     Arabica  coffee  beans of the quality we purchase are not readily available
on  the  commodity markets.  We depend on our relationships with coffee brokers,
exporters  and  growers for the supply of our primary raw material, high quality
Arabica  coffee  beans.  In  both  2002  and 2001, we purchased over half of our
green  coffee  beans  through  one  broker.  If  our  relationships  with coffee
brokers,  exporters  and  growers  deteriorate,  we  may  be unable to procure a
sufficient  quantity  of high quality coffee beans.  In such case, we may not be
able  to  fulfill the demand of our existing customers, supply new retail stores
or  expand other channels of distribution.  A raw material shortage could result
in  decreased  revenue  or  could  impair  our  ability  to expand our business.

POLITICAL  INSTABILITY  IN  COFFEE GROWING REGIONS COULD RESULT IN A DECREASE IN
THE  AVAILABILITY  OF HIGH QUALITY ARABICA COFFEE BEANS NEEDED FOR THE CONTINUED
OPERATION  AND  GROWTH  OF  OUR BUSINESS AND AN INCREASE IN OUR OPERATING COSTS.

     We  roast  Arabica  coffee  beans from many different regions to produce 32
types  and  blends of coffee.  The political situation in many of those regions,
including  Africa, Indonesia and Central and South America, can be unstable, and
such instability could affect our ability to purchase coffee from those regions.
If  Arabica  coffee  beans  from  a  region  become unavailable or prohibitively
expensive, we may be forced to discontinue particular coffee types and blends or
substitute  coffee  beans  from  other  regions  in  our  blends.  Frequent
substitutions  and  changes  in  our  coffee  product  lines  may  lead  to cost
increases,  customer  alienation  and  fluctuations  in  our  gross  margins.
Furthermore,  a  worldwide  supply  shortage  of the high quality Arabica coffee
beans  we  purchase  could  have  a  material  adverse  effect  on our business.

                                       26
<PAGE>

OUR  ROASTING  METHODS  ARE  NOT  PROPRIETARY,  SO  COMPETITORS  MAY  BE ABLE TO
DUPLICATE  THEM,  WHICH  COULD  HARM  OUR  COMPETITIVE  POSITION.

     We  consider  our  roasting methods essential to the flavor and richness of
our  roasted  whole bean coffee and, therefore, essential to our brand.  Because
we  do not hold any patents for our roasting methods, it may be difficult for us
to  prevent  competitors  from copying our roasting methods.  If our competitors
copy  our roasting methods, the value of our brand may be diminished, and we may
lose  customers  to  our  competitors.  In  addition, competitors may be able to
develop roasting methods that are more advanced than our roasting methods, which
may  also  harm  our  competitive  position.

COMPETITION  IN  THE  SPECIALTY  COFFEE  MARKET  IS INTENSE AND COULD AFFECT OUR
PROFITABILITY.

     The  specialty coffee market is highly fragmented.  Our primary competitors
in  whole  bean  specialty  coffee  sales  include  Gevalia (Kraft Foods), Green
Mountain  Coffee, Illy Caffe , Millstone (Procter & Gamble), Seattle's Best (AFC
Enterprises)  and  Starbucks.  There  are numerous smaller, regional brands that
also  compete  in this category.  In addition, we compete indirectly against all
other  coffee  brands  on  the market.  A number of nationwide coffee marketers,
such  as  Kraft  Foods,  Procter  &  Gamble and Nestle, are distributing premium
coffee  brands  in  supermarkets.  These  premium  coffee  brands  may  serve as
substitutes  for  our  whole  bean  coffee.  In addition to competing with other
distributors  of  whole  bean  coffee,  we  compete  with  retailers of prepared
beverages,  including  coffee  house  chains,  particularly  Starbucks, numerous
convenience  stores, restaurants, coffee shops and street vendors.  If we do not
succeed  in  effectively  differentiating  ourselves from our competitors or our
competitors  adopt  our  strategies,  then  our  competitive  position  will  be
weakened.

     Despite  competing  in  a fragmented product category, whole bean specialty
coffee  brands  are  being  established  across  multiple distribution channels.
Several  competitors  are  aggressive  in  obtaining  distribution  in specialty
grocery  and  gourmet  food stores, through online and mail order and in office,
restaurant and food service locations.  We have only recently begun to penetrate
these  channels.  Other competitors may have an advantage over us based on their
earlier  entry  into  these  distribution  channels.

     Competition in the specialty coffee market is becoming increasingly intense
as  relatively  low  barriers  to  entry  encourage new competitors to enter the
specialty  coffee  market.  Many  of  these  new  market  entrants  may  have
substantially  greater financial, marketing and operating resources than us.  In
addition, many of our existing competitors have substantially greater financial,
marketing  and  operating  resources  than  us.

ADVERSE  PUBLIC  OR  MEDICAL  OPINION  ABOUT  CAFFEINE  MAY  HARM  OUR BUSINESS.

     Our  specialty  coffee  contains  significant amounts of caffeine and other
active  compounds, the health effects of some of which are not fully understood.
A  number  of research studies conclude or suggest that excessive consumption of
caffeine may lead to increased heart rate, nausea and vomiting, restlessness and
anxiety,  depression, headaches, tremors, sleeplessness and other adverse health
effects.  An  unfavorable  report  on  the  health  effects of caffeine or other
compounds  present  in  coffee could significantly reduce the demand for coffee,
which  could  harm  our  business  and  reduce  our  sales  and  profits.

ADVERSE  PUBLICITY  REGARDING  CUSTOMER  COMPLAINTS  MAY  HARM  OUR  BUSINESS.

     We  may  be the subject of complaints or litigation from customers alleging
beverage  and food-related illnesses, injuries suffered on the premises or other
quality,  health or operational concerns.  Adverse publicity resulting from such
allegations  may  materially  adversely  affect  us,  regardless of whether such
allegations  are  true  or  whether  we  are  ultimately  held  liable.


ITEM  8.     FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

     All  information  required  by this item is included on pages F-1 to F-7 in
Item  15  of  this  Report  and  is  incorporated  in  this  item  by reference.


ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL  DISCLOSURE

     None.

                                       27
<PAGE>


                                    PART III

ITEM  10.       DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     Information  respecting continuing directors and nominees of the Company is
set  forth  under  the  caption  "Election  of Directors" in the Company's Proxy
Statement  relating  to  its  2003  Annual  Meeting  of  Stockholders  and  is
incorporated  by reference into this Form 10-K Report.  The Proxy Statement will
be  filed  with  the  Securities and Exchange Commission in accordance with Rule
14a-6(c)  promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange  Act.").  With  the  exception  of the foregoing information and other
information  specifically  incorporated by reference into this Form 10-K Report,
the Proxy Statement is not being filed as a part hereof.  Information respecting
executive  officers  of  the  Company  is  set  forth  at Part I of this Report.

     Information respecting compliance with Section 16(a) of the Exchange Act is
set  forth  under  the  caption  "Section  16(a)  Beneficial Ownership Reporting
Compliance"  in  the  Proxy Statement and is incorporated by reference into this
Form  10-K  Report.


ITEM  11.       EXECUTIVE  COMPENSATION

     Information  concerning  executive  compensation required by Item 11 is set
forth  under  the  captions  "Executive  Compensation," "Stock Option Grants and
Exercises,"  "Employment  Agreements" and "Compensation Committee Interlocks" in
the Proxy Statement and is incorporated by reference into this Form 10-K Report.


ITEM  12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT

     Information  concerning security ownership of certain beneficial owners and
management  required  by  Item  12  is  set  forth  under  the caption "Security
Ownership of Certain Beneficial Owners and Management" and "Our Equity Incentive
Plans"  in  the  Proxy Statement and is incorporated by reference into this Form
10-K  Report.


ITEM  13.       CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Information  concerning  certain  relationships  and  related  transactions
required  by Item 13 is set forth under the captions "Employment Agreements" and
"Certain  Transactions"  in the Proxy Statement and is incorporated by reference
into  this  Form  10-K  Report.


ITEM  14.  CONTROLS  AND  PROCEDURES

     (a)     Evaluation  of  Disclosure  Controls  and  Procedures

     Based  upon  their  evaluation  of  our  disclosure controls and procedures
conducted  within  90  days  of the date of filing this report on Form 10-K, our
Chief  Executive  Officer  and  Chief  Financial Officer have concluded that our
disclosure  controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
of  the  Securities  Exchange  Act  of  1934,  as  amended)  are  effective.

     (b)     Changes  in  Internal  Controls

     There  were no significant changes in the internal controls of Peet's or in
other  factors  that could significantly affect these controls subsequent to the
date  of  their  evaluation.

     Limitations  on  the  Effectiveness  of  Controls.

     Despite the periodic review of our disclosure controls and procedures, such
controls  and  procedures  may  not  prevent  all error and all fraud.  Inherent
limitations  include  the  realities  that  judgments  in decision-making can be
faulty,  and  that  breakdowns  can  occur  because  of simple error or mistake.
Because  of  the  inherent  limitations  in any control system, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud,  if  any,  within the company have been detected.  Additionally, controls
can  be circumvented by the individual acts of some persons, by collusion of two
or  more  people,  or  by  management  override  of  the  controls.


                                       28
<PAGE>

                                     PART IV


ITEM  15.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES,  AND  REPORTS ON FORM 8-K

     The  following  documents  are  filed  as  part  of  this  Form  10-K.

     (a)(1)  Index  to  Consolidated  Financial  Statements.

     The following Consolidated Financial Statements of Peet's Coffee &Tea, Inc.
and  its  subsidiaries  are  filed  as  part  of  this  Form  10-K:


<TABLE>
<CAPTION>



                                                                                                 PAGE
                                                                                                 ----
<S>                                                                                              <C>

Independent Auditors' Report                                                                     F-2
-----------------------------------------------------------------------------------------------  ----

Consolidated Balance Sheets as of December 30, 2001 and December 29, 2002                        F-3
-----------------------------------------------------------------------------------------------  ----

Consolidated Statements of Operations for the Years Ended December 31, 2000, December 30, 2001,
 and December 29, 2002                                                                           F-4
-----------------------------------------------------------------------------------------------  ----

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, December
 30, 2001, and December 29, 2002                                                                 F-5
-----------------------------------------------------------------------------------------------  ----

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, December 30, 2001,
 and December 29, 2002                                                                           F-6
-----------------------------------------------------------------------------------------------  ----

Notes to Consolidated Financial Statements                                                       F-7
-----------------------------------------------------------------------------------------------  ----
</TABLE>


(a)(2)  Index  to  Financial  Statement  Schedule.

     Schedules  are  omitted  because  they  are not applicable, not required or
because  the  required  information  is  included  in the Consolidated Financial
Statements  or  Notes  thereto.

     (a)(3)  Listing  of  Exhibits

EXHIBIT     DESCRIPTION
-------     -----------
3.1      Amended  and  Restated  Articles  of  Incorporation.*
3.2      Amended  and  Restated  Bylaws.*
4.1      Form  of  common  stock  certificate.*
10.1     Credit  Agreement,  dated  as of September 1, 2000, among Peet's Coffee
         and  Tea,  Inc.,  Peet's Companies, Inc., Peet's Trademark Company and
         General  Electric  Capital  Corporation.*
10.2     Letter  Agreement  dated  October 11, 2000 among Peet's Coffee and Tea,
         Inc.,  Peet's  Companies,  Inc.,  Peet's Trademark Company and General
         Electric  Capital  Corporation.*
10.3     First  Amendment to Credit Agreement dated as of January 19, 2001 among
         Peet's Operating Company, Inc. (formerly Peet's Coffee and Tea, Inc.),
         Peet's  Coffee  &  Tea, Inc. (formerly Peet's Companies, Inc.), Peet's
         Trademark  Company  and  General  Electric  Capital  Corporation.*
10.4     Loan Agreement, dated as of December 1, 1995, by and between California
         Statewide Communities Development Authority and Peet's Coffee and Tea,
         Inc.*
10.5     Amended  and  Restated  1993  Stock  Option  Plan.  (1)*

                                       29
<PAGE>

10.6     1994  California  Stock  Option  Plan.  (1)*
10.7     1997  Equity  Incentive  Plan  and form of Stock Option Agreement. (1)*
10.8     Peet's  Operating  Company,  Inc.  Savings  and  Retirement  Plan. (1)*
10.9     2000  Equity  Incentive  Plan  and form of Stock Option Agreement. (1)*
10.10    2000  Non-Employee  Director  Plan and form of Stock Option Agreement.
         (1)*
10.11    2000  Employee  Stock  Purchase  Plan  and  form  of  Offering.  (1)*
10.12    Peet's  Operating  Company,  Inc. Key Employee Severance Benefit Plan.
         (2)*
10.13    Change  of  Control  Option  Acceleration  Plan.  (1)*
10.14    Advisory  Engagement  Letter  dated  December  9, 1996, between Peet's
         Operating  Company,  Inc.  and  Jesse.Hansen&Co.*
10.15    Peet's  Operating  Company, Inc. Key Employment Agreement for Chairman
         dated  as  of  January  4,  1999.  (2)*
10.16    Peet's  Operating  Company,  Inc.  Key  Employment Agreement for Chief
         Executive  Officer  dated  as  of  May  9,  2000.  (2)*
10.17    Peet's  Operating  Company,  Inc.  Key  Employment  Agreement for Vice
         President,  Coffee  dated  as  of  June  6,  2000.  (2)*
10.18    Peet's  Operating  Company,  Inc.  Key  Employment Agreement for Chief
         Financial  Officer  dated  as  of  January  4,  1999.  (2)*
10.19    Peet's  Operating  Company,  Inc.  Key  Employment  Agreement for Vice
         President,  Marketing  dated  as  of  January  4,  1999.  (2)*
10.20    Form  of  Indemnity  Agreement  between the registrant and each of its
         directors  and  officers.  (2)
10.21    Second Amendment to Credit Agreement, dated as of June 29, 2001, among
         Peet's  Operating  Company,  Inc.,  Peet's  Trademark  Company, Peet's
         Coffee  &  Tea,  Inc.  and  General  Electric  Capital  Corporation.
         Incorporated  by reference to Exhibit 10.23 to the Company's quarterly
         report  on  Form  10-Q  for  the  quarter  ended  July  1,  2001.
10.22    Third  Amendment to Credit Agreement, dated as of March 1, 2002, among
         Peet's  Operating  Company,  Inc.,  Peet's  Trademark  Company, Peet's
         Coffee  &  Tea,  Inc.  and  General  Electric  Capital  Corporation.
         Incorporated  by  reference  to  Exhibit 10.24 to the Company's annual
         filing  on  Form  10-K  for  the  year  ended  December  30,  2001.
10.23    Fourth  Amendment to Credit Agreement dated as of April 23, 2002 among
         Peet's  Operating  Company,  Inc.,  Peet's  Trademark  Company, Peet's
         Coffee  &  Tea,  Inc.  and  General  Electric  Capital  Corporation.
         Incorporated  by reference to Exhibit 10.24 to the Company's quarterly
         report  on  Form  10-Q  for  the  quarter  ended  March  31,  2002.
10.24    Peet's Coffee & Tea, Inc. Key Employment Agreement for Chief Executive
         Officer  dated as of May 6, 2002. Incorporated by reference to Exhibit
         10.17  to  the Company's quarterly report on Form 10-Q for the quarter
         ended  June  30,  2002.  (1)
10.25    Peet's  Coffee  &  Tea,  Inc.  Amended  and Restated 2000 Non-Employee
         Director  Stock  Option  Plan  and  Form  of  Stock  Option Agreement.
         Incorporated  by reference to Exhibit 10.10 to the Company's quarterly
         report  on  Form  10-Q  for  the quarter ended September 29, 2002. (1)

                                       30
<PAGE>

10.26    Fifth  Amendment  to  Credit  Agreement  dated as of December 31, 2002
         among Peet's Operating Company, Inc., Peet's Trademark Company, Peet's
         Coffee  &  Tea,  Inc.  and  General  Electric  Capital  Corporation.
10.27    Sixth  Amendment  to  Credit  Agreement  dated as of February 21, 2003
         among Peet's Operating Company, Inc., Peet's Trademark Company, Peet's
         Coffee  &  Tea,  Inc.  and  General  Electric  Capital  Corporation.
21.1     Subsidiaries  of  the  registrant.*
23.1     Consent  of  Deloitte  &  Touche  LLP.
99.1     Certification  of the Company's Chief Executive Officer, Patrick O'Dea,
         pursuant  to  Section  906  of  Sarbanes-Oxley  Act  of  2002.
99.2     Certification  of  the  Company's  Chief  Financial  Officer,  Mark  N.
         Rudolph,  pursuant  to  Section  906  of  Sarbanes-Oxley  Act of 2002.
______________
*     Incorporated by reference to Exhibit 10.18 to the Registrant's Information
Statement  on  Form  S-1  (File  No.  333-47957)  filed  on October 13, 2000, as
subsequently  amended.
(1)     Compensatory  plan  or  arrangement.
(2)     Management  contract.

     (b)  No  reports  on  Form 8-K were filed by the Company during the quarter
ended  December  29,  2002.

                                       31
<PAGE>


                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.


Date:  March  28,  2003            PEET'S  COFFEE  &  TEA,  INC.
                                   By:  /s/  Patrick  J.  O'Dea
                                        -----------------------
                                       Patrick  J.  O'Dea
                                       President  and  Chief  Executive  Officer


                                POWER OF ATTORNEY

     KNOW  ALL  PERSONS  BY  THESE  PRESENTS,  that  each person whose signature
appears  below constitutes and appoints Patrick J. O'Dea and Mark N. Rudolph and
each  of  them,  as  his true and lawful attorneys-in-fact and agents, with full
power  of  substitution  and resubstitution, for him and in his name, place, and
stead,  in any and all capacities, to sign any and all amendments to this report
and  to file the same, with all granting unto said attorneys-in-fact and agents,
and  each of them, full power and authority to do and perform each and every act
and  thing  requisite and necessary to be done in connection therewith, as fully
to  all intents and purposes as he might or could do in person, hereby ratifying
and  confirming  all  that said attorneys-in-fact and agents, or any of them, or
their  or  his substitute or substitutes, may lawfully do or cause to be done by
virtue  hereof.

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
registrant  and  in  the  capacities  and  on  the  dates  indicated.

     SIGNATURE                 TITLE                                        DATE
     ---------                 -----                                        ----

/s/  PATRICK  J.  O'DEA     President, Chief Executive Officer    March 28, 2003
-----------------------
     Patrick  J.  O'Dea     and Director  (Principal  Executive
                            Officer)

/s/  MARK  N. RUDOLPH       Vice President, Chief Financial       March 28, 2003
---------------------
     Mark  N.  Rudolph      Officer, Secretary  and  Treasurer
                            (Principal Financial  and  Accounting
                            Officer)

/s/ CHRISTOPHER P. MOTTERN  Chairman                            March  28,  2003
-----------------------------
    Christopher P. Mottern

/s/  GERALD  BALDWIN        Director                            March  28,  2003
--------------------
     Gerald  Baldwin

/s/  HILARY  BILLINGS       Director                            March  28,  2003
---------------------
     Hilary  Billings

/s/  GORDON  A.  BOWKER     Director                            March  28,  2003
-----------------------
     Gordon  A.  Bowker

/s/  H. WILLIAM JESSE, JR.  Director                              March 28, 2003
----------------------------
     H. William Jesse, Jr.

/s/  JEAN-MICHEL  VALETTE   Director                            March  28,  2003
-------------------------
     Jean-Michel  Valette

                                       32
<PAGE>




                                 CERTIFICATIONS



I,  Patrick  J.  O'Dea,  certify  that:

     1.     I  have  reviewed this annual report on Form 10-K of Peet's Coffee &
Tea,  Inc.;

     2.     Based  on  my  knowledge,  this  annual  report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

     4.     The  registrant's other certifying officer and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

          (a)     Designed  such  disclosure  controls  and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  annual  report  is  being  prepared;

          (b)     Evaluated  the  effectiveness  of  the registrant's disclosure
controls  and procedures as of a date within 90 days prior to the filing date of
this  annual  report  (the  "Evaluation  Date");  and

          (c)     Presented  in  this  annual  report  our conclusions about the
effectiveness  of the disclosure controls and procedures based on our evaluation
as  of  the  Evaluation  Date;

     5.     The  registrant's  other  certifying  officer  and I have disclosed,
based  on our most recent evaluation, to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  functions):

          (a)     All  significant  deficiencies  in  the design or operation of
internal  controls  which  could  adversely  affect  the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's  auditors  any  material  weaknesses  in  internal  controls;  and

          (b)     Any  fraud,  whether or not material, that involves management
or  other  employees  who  have  a significant role in the registrant's internal
controls;  and

     6.     The  registrant's  other  certifying officer and I have indicated in
this  annual  report  whether  or not there were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.



Date:     March  28,  2003             /s/  Patrick  J.  O'Dea
                                       -----------------------
                                       Patrick  J.  O'Dea
                                       President  and  Chief  Executive  Officer


                                       33
<PAGE>

I,  Mark  N.  Rudolph,  certify  that:

     1.     I  have  reviewed this annual report on Form 10-K of Peet's Coffee &
Tea,  Inc.;

     2.     Based  on  my  knowledge,  this  annual  report does not contain any
untrue  statement  of a material fact or omit to state a material fact necessary
to  make  the  statements  made,  in light of the circumstances under which such
statements  were made, not misleading with respect to the period covered by this
annual  report;

     3.     Based on my knowledge, the financial statements, and other financial
information  included  in  this  annual  report,  fairly present in all material
respects  the  financial  condition, results of operations and cash flows of the
registrant  as  of,  and  for,  the  periods  presented  in  this annual report;

     4.     The  registrant's other certifying officer and I are responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  have:

          (a)     Designed  such  disclosure  controls  and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  annual  report  is  being  prepared;

          (b)     Evaluated  the  effectiveness  of  the registrant's disclosure
controls  and procedures as of a date within 90 days prior to the filing date of
this  annual  report  (the  "Evaluation  Date");  and

          (c)     Presented  in  this  annual  report  our conclusions about the
effectiveness  of the disclosure controls and procedures based on our evaluation
as  of  the  Evaluation  Date;

     5.     The  registrant's  other  certifying  officer  and I have disclosed,
based  on our most recent evaluation, to the registrant's auditors and the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  functions):

          (a)     All  significant  deficiencies  in  the design or operation of
internal  controls  which  could  adversely  affect  the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's  auditors  any  material  weaknesses  in  internal  controls;  and

          (b)     Any  fraud,  whether or not material, that involves management
or  other  employees  who  have  a significant role in the registrant's internal
controls;  and

     6.     The  registrant's  other  certifying officer and I have indicated in
this  annual  report  whether  or not there were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.



Date:     March  28,  2003          /s/  Mark  N.  Rudolph
                                    ----------------------
                                   Mark  N.  Rudolph
                                   Vice  President,  Chief  Financial  Officer,
                                   Treasurer  and  Secretary

                                       34
<PAGE>

<TABLE>
<CAPTION>


                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page
--------------------------------------------------------------------------------------
<S>                                                                                     <C>

Independent Auditors' Report                                                            F-2
--------------------------------------------------------------------------------------  ---

Consolidated Balance Sheets as of December 30, 2001 and December 29, 2002               F-3
--------------------------------------------------------------------------------------  ---

Consolidated Statements of Operations for the Years Ended December 31, 2000,
December 30, 2001, and December 29, 2002                                                F-4
--------------------------------------------------------------------------------------  ---

Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000,
December 30, 2001, and December 29, 2002                                                F-5
--------------------------------------------------------------------------------------  ---

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000,
December 30, 2001, and December 29, 2002                                                F-6
--------------------------------------------------------------------------------------  ---

Notes to Consolidated Financial Statements                                              F-7
--------------------------------------------------------------------------------------  ---
</TABLE>






                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To  the  Board  of  Directors  and  Shareholders
     Peet's  Coffee  &  Tea,  Inc.

     We  have  audited  the  accompanying  consolidated balance sheets of Peet's
Coffee  &  Tea,  Inc  and  subsidiaries as of December 30, 2001 and December 29,
2002,  and  the  related  consolidated  statements  of operations, shareholders'
equity  and  cash flows for each of the three years in the period ended December
29,  2002.  These  financial  statements are the responsibility of the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audits.

     We  conducted  our  audits  in accordance with auditing standards generally
accepted  in the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

     In  our  opinion, such consolidated financial statements present fairly, in
all  material  respects, the financial position of Peet's Coffee & Tea, Inc. and
subsidiaries  as  of  December 30, 2001 and December 29, 2002 and the results of
their  operations and their cash flows for each of the three years in the period
ended  December  29,  2002,  in  conformity with accounting principles generally
accepted  in  the  United  States  of  America.

     As  discussed  in Note 12 to the financial statements, effective January 1,
2001,  the  Company  changed  its  method of accounting for derivative financial
instruments  to  conform to Statement of Financial Accounting Standards No. 133.

/s/  DELOITTE  &  TOUCHE  LLP

San  Francisco,  California
February  13,  2003

                                      F-2
<PAGE>








<TABLE>
<CAPTION>

                                        PEET'S COFFEE & TEA, INC.
                                      CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)


                                                                          DECEMBER 30,   DECEMBER 29,
                                                                              2001           2002
                                                                         --------------  -------------
<S>                                                                      <C>             <C>
ASSETS

Current assets:
  Cash and cash equivalents                                              $       2,718   $      19,672
  Accounts receivable (net of allowance of $58 and $75)                          1,371           2,210
  Income tax receivable                                                                          1,117
  Inventories                                                                    8,945          11,007
  Deferred income taxes                                                            288             461
  Prepaid expenses                                                               1,100           1,342
                                                                         --------------  -------------

           Total current assets                                                 14,422          35,809

Property and equipment, net                                                     23,629          27,929

Deferred income taxes                                                            1,305

Intangible and other assets, net                                                 2,053           3,305

Long-term U.S. Government & Agency securities                                                   28,102
                                                                         --------------  -------------

Total assets                                                             $      41,409   $      95,145
                                                                         ==============  =============

LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------

Current liabilities:
  Borrowings under line of credit                                        $       1,968
  Accounts payable                                                               4,166   $       6,463
  Accrued compensation and benefits                                              2,355           3,741
  Other accrued liabilities                                                      2,105           2,638
  Current portion of long-term borrowings                                          513             468
                                                                         --------------  -------------

           Total current liabilities                                            11,107          13,310

Long-term borrowings, less current portion                                         895             424

Deferred income taxes                                                                              181

Deferred lease credits                                                             637             726
                                                                         --------------  -------------

Total liabilities                                                               12,639          14,641
                                                                         --------------  -------------

Commitments and contingencies

Shareholders' equity:
  Common stock, no par value; authorized 50,000,000 shares; issued and
    outstanding:  8,272,000 shares and 12,103,000 shares                        31,609          78,014
  Accumulated other comprehensive income (loss), net of tax                       (407)            265
  Retained earnings (accumulated deficit)                                       (2,432)          2,225
                                                                         --------------  -------------

           Total shareholders' equity                                           28,770          80,504
                                                                         --------------  -------------

Total liabilities and shareholders' equity                               $      41,409   $      95,145
                                                                         ==============  =============
</TABLE>


See  notes  to  consolidated  financial  statements.

                                      F-3
<PAGE>


<TABLE>
<CAPTION>

                                  PEET'S COFFEE & TEA, INC.
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                                                               2000      2001      2002
                                                             --------  --------  ---------
<S>                                                          <C>       <C>       <C>
Net revenue                                                  $84,302   $94,400   $104,073
                                                             --------  --------  ---------

Operating expenses:
  Cost of sales and related occupancy expenses                40,655    45,357     48,146
  Operating expenses                                          28,073    30,617     33,221
  Marketing and advertising                                    6,069     4,812      4,554
  Depreciation and amortization                                4,576     5,038      4,568
  General and administrative expenses                          5,893     6,243      6,732
                                                             --------  --------  ---------

           Total operating costs and expenses                 85,266    92,067     97,221
                                                             --------  --------  ---------

Income (loss) from operations                                   (964)    2,333      6,852

Interest income                                                   25        47        660
Interest expense                                              (1,933)     (476)      (120)
                                                             --------  --------  ---------

Income (loss) before income taxes                             (2,872)    1,904      7,392

Income tax provision (benefit)                                  (596)      749      2,735
                                                             --------  --------  ---------

Net income (loss)                                            $(2,276)  $ 1,155   $  4,657
                                                             ========  ========  =========

Net income (loss) per share:
     Basic                                                   $ (0.50)  $  0.15   $   0.43
                                                             ========  ========  =========
     Diluted                                                 $ (0.50)  $  0.14   $   0.40
                                                             ========  ========  =========

Shares used in calculation of net income (loss) per share:
     Basic                                                     4,515     7,941     10,919
                                                             ========  ========  =========
     Diluted                                                   4,515     8,212     11,627
                                                             ========  ========  =========

</TABLE>


See  notes  to  consolidated  financial  statements.

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                                  PEET'S COFFEE & TEA, INC.
                                       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                        (IN THOUSANDS)

                                       SERIES A                                RETAINED       ACCUMULATED
                                    PREFERRED STOCK          COMMON STOCK      EARNINGS/      OTHER            TOTAL
                                    ---------------          ------------

                                   SHARES                 SHARES               ACCUMULATED    COMPREHENSIVE    SHAREHOLDERS'
                                OUTSTANDING    AMOUNT   OUTSTANDING  AMOUNT      DEFICIT      INCOME/(LOSS)       EQUITY
                                ------------  --------  -----------  -------  -------------  ---------------  ---------------
<S>                             <C>           <C>       <C>          <C>      <C>            <C>              <C>
Balance at January 2, 2000              471   $ 4,537         4,514  $ 7,966  $     (1,312)                   $       11,191
                                                                                                              ---------------
Stock options exercised,
including tax benefit                                             2       13                                              13
                                                        -----------                                           ---------------
Amortization of
stock compensation                                                       238                                             238
                                                                     -------                                  ---------------
Net loss                                                                            (2,275)                           (2,275)
                                                                              -------------                   ---------------
Balance at December 31, 2000            471   $ 4,537         4,516  $ 8,217  $     (3,587)                   $        9,167

Conversion of preferred shares         (471)   (4,537)          943    4,537                                               -
Stock sold in
Initial Public Offering,
net of expenses                                               2,682   17,793                                          17,793
Stock options exercised,
including tax benefit                                            94      507                                             507
Stock sold in Employee
Stock Purchase Program                                           37      250                                             250
Amortization of
stock compensation                                                       305                                             305
Cumulative effect of
accounting change
(FAS 133), net of tax of $519                                                                $         (785)
Unrealized losses
on cash flow hedges,
net of tax of $195                                                                                     (295)
Reclassification of
net losses on cash
flow hedges to
to cost of goods sold,
net of tax of $445                                                                                      673
                                                                                             ---------------
Other comprehensive loss                                                                               (407)            (407)
Net income                                                                           1,155                             1,155
                                                                              -------------                   ---------------
Balance at December 30, 2001              -         -         8,272  $31,609  $     (2,432)  $         (407)  $       28,770

Stock sold in public offering,
net of expenses                                               3,138   41,030                                          41,030
Stock options and
warrants exercised,
including tax benefit                                           610    4,517                                           4,517
Stock sold in Employee
Stock Purchase Program                                           83      568                                             568
Amortization of
stock compensation                                                       290                                             290
Unrealized gains on
cash flow hedges,
net of tax of $38                                                                                        66
Reclassification of
net losses on cash
flow hedges to
cost of goods sold,
net of tax of $252                                                                                      379
Net unrealized gain
on investments,
net of tax of $133                                                                                      227
                                                                                             ---------------
Other comprehensive income                                                                              672              672
Net income                                                                           4,657                             4,657
                                                                              -------------                   ---------------
Balance at December 29, 2002              -   $     -        12,103  $78,014  $      2,225   $          265   $       80,504
                                ============  ========  ===========  =======  =============  ===============  ===============

                                 COMPREHENSIVE
                                 INCOME/(LOSS)
                                ---------------
<S>                             <C>
Balance at January 2, 2000      $         (144)
                                ===============
Stock options exercised,
including tax benefit

Amortization of
stock compensation

Net loss                        $       (2,275)
                                ---------------
Balance at December 31, 2000    $       (2,275)
                                ===============
Conversion of preferred shares
Stock sold in
Initial Public Offering,
net of expenses
Stock options exercised,
including tax benefit
Stock sold in Employee
Stock Purchase Program
Amortization of
stock compensation
Cumulative effect of
accounting change
(FAS 133), net of tax of $519
Unrealized losses
on cash flow hedges,
net of tax of $195
Reclassification of
net losses on cash
flow hedges to
to cost of goods sold,
net of tax of $445

Other comprehensive loss                  (407)
Net income                               1,155
                                ---------------
Balance at December 30, 2001    $          748
                                ===============
Stock sold in public offering,
net of expenses
Stock options and
warrants exercised,
including tax benefit
Stock sold in Employee
Stock Purchase Program
Amortization of
stock compensation
Unrealized gains on
cash flow hedges,
net of tax of $38
Reclassification of
net losses on cash
flow hedges to
cost of goods sold,
net of tax of $252
Net unrealized gain
on investments,
net of tax of $133

Other comprehensive income      $          672
Net income                               4,657
                                ---------------
Balance at December 29, 2002    $        5,329
                                ===============
</TABLE>


See  notes  to  consolidated  financial  statements.



                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                             PEET'S COFFEE & TEA, INC.
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (IN THOUSANDS)


                                                                                  2000       2001       2002
                                                                                ---------  ---------  ---------
<S>                                                                             <C>        <C>        <C>
Cash flows from operating activities:
  Net income (loss)                                                             $ (2,275)  $  1,155   $  4,657
  Adjustments to reconcile net income (loss) to net cash provided by
  operating activities:
    Depreciation and amortization                                                  5,210      5,693      5,251
    Tax benefit from exercise of stock options and amortization of discounted
         stock options                                                               238        305      1,543
    Deferred income taxes                                                           (472)       718      1,274
    Reclassification of hedging losses in OCI                                                   673        379
    Ineffective portion of hedges                                                               169         27
    Loss on disposition of assets                                                    188          6         11
  Changes in other assets and liabilities:
    Accounts receivable                                                             (214)      (309)    (1,956)
    Inventories                                                                   (1,730)    (1,309)    (2,062)
    Prepaid expenses and other                                                       115       (217)      (211)
    Other assets                                                                    (207)        22     (1,530)
    Accounts payable, accrued liabilities and other liabilities                    1,816     (1,123)     4,419
                                                                                ---------  ---------  ---------

           Net cash provided by operating activities                               2,669      5,783     11,802
                                                                                ---------  ---------  ---------

Cash flows from investing activities:
  Purchases of property and equipment                                             (5,518)    (6,511)    (9,316)
  Proceeds from sales of property and equipment                                        4         17
  Additions to intangible assets                                                    (276)      (350)       (35)
  Purchase of long term U.S. Government & Agency securities, net                                       (27,875)
                                                                                ---------  ---------  ---------

           Net cash used in investing activities                                  (5,790)    (6,844)   (37,226)
                                                                                ---------  ---------  ---------

Cash flows from financing activities:
  Proceeds from borrowings                                                        46,258
  Repayments of debt                                                             (41,544)   (17,451)    (2,484)
  Payments of stock offering costs (completed in January 2001)                    (1,082)
  Net proceeds from issuance of common stock                                          13     19,632     44,862
                                                                                ---------  ---------  ---------

           Net cash provided by financing activities                               3,645      2,181     42,378
                                                                                ---------  ---------  ---------

Change in cash and cash equivalents                                                  524      1,120     16,954

Cash and cash equivalents, beginning of period                                     1,074      1,598      2,718
                                                                                ---------  ---------  ---------

Cash and cash equivalents, end of period                                        $  1,598   $  2,718   $ 19,672
                                                                                =========  =========  =========

Supplemental cash flow disclosures:
     Cash paid for:
          Interest                                                              $  1,668   $    478   $     48
          Income taxes                                                               108         29      2,050

NON CASH INVESTING AND FINANCING ACTIVITIES -
  Property acquired under capital lease                                         $    476
  Conversion of preferred stock to common stock upon IPO                                   $  4,537
  IPO fees accrued at December 31, 2000 applied to proceeds in 2001                           1,082
  FAS 133 coffee hedging activities:
     Inventory                                                                               (1,304)
     Deferred taxes                                                                             269   $    (39)
     Other comprehensive loss                                                                   407        (65)
     Other liabilities                                                                          628        104
</TABLE>


See  notes  to  consolidated  financial  statements.

                                      F-6
<PAGE>

                            PEET'S COFFEE & TEA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     HISTORY  AND  ORGANIZATION

     Peet's  Coffee  &  Tea, Inc., (the ''Company'') sells fresh roasted coffee,
hand  selected tea and related items in several distribution channels, including
specialty  grocery  and  gourmet  food stores, online and mail order, office and
restaurant  accounts  and  company-operated retail stores.  At December 30, 2001
and  December  29,  2002,  the  Company  operated  60  and  65  retail  stores,
respectively,  in  California,  Illinois,  Oregon,  and  Massachusetts.

2.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the  accounts of the Company and its subsidiaries.  All significant intercompany
transactions  have  been  eliminated  in  consolidation.

     USE  OF  ESTIMATES  - The preparation of financial statements in conformity
with  accounting  principles  generally accepted in the United States of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosures of contingent assets and
liabilities  at the date of the financial statements and the reported amounts of
revenues  and  expenses during the reporting period. Actual results could differ
from  those  estimates.

     RECLASSIFICATIONS  -  Certain  reclassifications  have  been  made to prior
years'  financial  statements  in  order  to  conform  with  the  current year's
presentation.

     YEAR END - The Company's year end is the Sunday closest to December 31. The
years  2002,  2001,  and  2000  included  52  weeks.

     CASH  AND  CASH  EQUIVALENTS - The Company considers all liquid investments
with  original  maturities  of  three  months  or  less  to be cash equivalents.

     INVENTORIES  -  Raw  materials  consist  primarily  of  green  bean coffee.
Finished  goods  include  roasted  coffee,  tea, accessory products, spices, and
packaged foods. All products are valued at the lower of cost or market using the
first-in,  first-out  method,  except  green  bean  and roasted coffee, which is
valued  at  the  average  cost.

     PROPERTY  AND  EQUIPMENT  are stated at cost. Depreciation and amortization
are  recorded on the straight-line method over the estimated useful lives of the
property  and  equipment, which range from 3 to 10 years. Leasehold improvements
are  amortized  using  the straight-line method over the lesser of the estimated
useful  life  or  the term of the related lease, which range from 3 to 10 years.

     INTANGIBLES  AND  OTHER  ASSETS  include lease rights, contract acquisition
costs,  deposits,  and restricted cash.  Lease rights represent payments made to
lessors  and  others  to  secure  retail  locations  and  are  amortized  on the
straight-line  method  over  the  life  of the related lease from 5 to 15 years.
Intangibles, net of amortization, were $1,251,000 and $1,040,000 at December 30,
2001  and December 29, 2002, respectively.  The related accumulated amortization
was  $1,636,000  and  $1,882,000  at  December  30,  2001 and December 29, 2002,
respectively.  Amortization  expense  for  2000,  2001,  and  2002 was $220,000,
$238,000  and  $246,000,  respectively.  Future  amortization  expense  for 2003
through  2007  is  estimated  at  $153,000,  $168,000,  $148,000,  $123,000, and
$114,000, respectively.  Contract acquisition costs represents a payment made to
a  retailer  to  obtain distribution for a specified period of time and is being
amortized  as  a  reduction  of  revenue  over  the  contract  period.

     INVESTMENT  POLICY  -  Investments are classified as available for sale and
are  recorded at fair market value. Any unrealized gains and losses are recorded
in  other  comprehensive  income/loss.

                                      F-7
<PAGE>

     IMPAIRMENT  OF LONG-LIVED ASSETS - The Company evaluates the recoverability
of  its  long-lived  assets  whenever  events  or  changes in circumstances have
indicated  that  the  carrying amount of its assets might not be recoverable. If
the  fair  value  is  less  than  the  carrying  amount  of the asset, a loss is
recognized  for  the  difference.  In  2000,  an impairment loss of $129,000 was
recorded  as general and administrative expense. No impairment loss was recorded
in  2001  or  in  2002.

     ACCRUED  COMPENSATION  AND  BENEFITS - Beginning in March 2002, the Company
modified its workers' compensation insurance policy to a high deductible program
with  an  overall  program  ceiling to minimize exposure.  We began recording an
estimated  liability  for  the self-insured portion of the workers' compensation
claims.  The  liability  is  determined actuarially, based on claims paid, filed
and  reserved  for,  and projected using an industry loss development factor, as
well as using historical experience ratings.  As of December 29, 2002, the first
10  months  of  the  policy  period,  we  had  $703,000  accrued  for  workers'
compensation.

     STORE  CLOSURE  -  The Company accrues an estimate for the costs associated
with  closing  under-performing  stores  in  the  period  in  which the store is
identified  and  approved  by  management  under a plan of termination. The plan
includes  the  method of disposition and the expected date of completion. Costs,
which are considered to have no future economic benefit, include direct costs to
terminate  a  lease  or  sublease a property and the difference between the book
value  and  estimated  recovery of fixed assets. Significant changes to the plan
are  unlikely.  The  operating costs, including depreciation, of stores or other
facilities  to  be  sold or closed are expensed during the period they remain in
use.

     The  Company  recorded  expenses  of $456,000 representing the write off of
leasehold  improvements,  fixed  assets and estimated future rental payments for
store  closures  during  2000.  No  expense was recorded in 2001 or 2002.  As of
December 30, 2001, the Company had an accrual of $59,000, representing estimated
future  rental  payments.

     In August 2001, the Company assigned, with the consent of the landlord, the
existing  lease  for  the  Naperville  location  to another entity.  The Company
remains  liable  for  rent  and  other  charges  under  the lease, which expires
December  31,  2008.  However,  the assignee's parent company has guaranteed the
payment  by the assignee of rent and other charges under the lease assignment up
to  $313,000  (equivalent  to  approximately  four  years  of rent due under the
lease).  The  Company  expects  that  the  assignee  will  make  all future rent
payments  required  under  the  lease  and  during  2001 reduced the accrual for
estimated future payments under the lease by $134,000.  The remaining accrual at
year  end 2001 represents the Company's remaining obligation for rental payments
of  seven  months  during the assignee's construction and rent abatement period.
All  rental  obligations had been paid and no accrual relating to store closures
remained  at  December  29,  2002.  See  Note  11.

     A  summary  of  the  accrual activity is as follows (excluding write-off of
assets)  (in  thousands):

<TABLE>
<CAPTION>


                                                                  BALANCE AT    ADDITIONS                 BALANCE
                                                                   BEGINNING   CHARGED TO                AT END OF
                                                                   OF PERIOD     EXPENSE    DEDUCTIONS     PERIOD
                                                                  -----------  -----------  -----------  ----------
<S>                                 <C>                           <C>          <C>          <C>          <C>
Accrual related to store closures:
                                    Year ended December 31, 2000  $        48  $       327        ($74)  $      301
                                    Year ended December 30, 2001          301            -        (242)          59
                                    Year ended December 29, 2002           59            -         (59)           -

</TABLE>

     REVENUE  RECOGNITION  - Net revenue is recorded upon purchases by customers
at  retail  locations  or  when  merchandise  is  received  by  customers in the
specialty  sales  channel.  Sales  returns  are  insignificant.  The  Company
establishes  an  allowance  for  estimated doubtful accounts based on historical
experience  and  current  trends,  which  management  believes  are appropriate.

     The  Company  records shipping revenue in net revenue. The Company recorded
shipping revenue of $1,371,000, $1,522,000, and $1,617,000 related to online and
mail  order  and  specialty  sales  in  2000,  2001,  and  2002,  respectively.

                                      F-8
<PAGE>

     A  summary  of  the  allowance  for  doubtful  accounts  is  as follows (in
thousands):

<TABLE>
<CAPTION>


                                                                BALANCE AT    ADDITIONS                BALANCE
                                                                 BEGINNING   CHARGES TO               AT END OF
                                                                 OF PERIOD     EXPENSE    WRITEOFFS     PERIOD
                                                                -----------  -----------  ----------  ----------
<S>                               <C>                           <C>          <C>          <C>         <C>
Allowance for doubtful accounts:
                                  Year ended December 31, 2000  $        61  $        23       ($15)  $       69
                                  Year ended December 30, 2001           69           30        (41)          58
                                  Year ended December 29, 2002           58          162       (145)          75

</TABLE>


     COST  OF  SALES  AND RELATED OCCUPANCY EXPENSES consist primarily of coffee
and  other  product  costs.  It  also  includes  plant  manufacturing (including
depreciation),  freight and distribution costs.  Occupancy expenses include rent
and  related  expenses  such  as  utilities.

     PREOPENING  COSTS  or  costs  associated  with the opening or remodeling of
stores,  such  as  payroll  and  rent,  are  expensed  as  incurred.

     HEDGING  ACTIVITIES  - The Company uses coffee futures and options to hedge
price  increases  in  price-to-be-  fixed  coffee  purchase  commitments  and
anticipated  coffee  purchases.  These  derivative instruments qualify for hedge
accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities.  See  Note  12.  Prior to the adoption of SFAS No. 133 on January 1,
2001, the contracts also qualified for hedge accounting and the gains and losses
were  accounted for as inventory costs and were recorded as expense or income as
the  related  coffee  was  sold.  The  Company does not hold or issue derivative
instruments  for  trading  purposes.

     FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS  -  The  carrying value of cash and
equivalents,  receivables  and  accounts  payable  approximates  fair  value.
Investments are recorded at fair value.  The carrying value of debt approximates
the  estimated  fair value due to floating interest rates on the debt.  The fair
value  of  futures contracts is the amount at which they could be settled, based
on estimates obtained from dealers.  At December 30, 2001 and December 29, 2002,
the  net  unrealized  gain/(loss)  on such contracts was ($112,000) and $31,000,
respectively.  See  Note  12.

     ADVERTISING  COSTS  are  expensed  as  incurred.  Advertising  expense  was
$5,158,000,  $3,860,000,  and  $3,856,000 in 2000, 2001, and 2002, respectively.

     DEFERRED  LEASE CREDITS - Certain of the Company's lease agreements provide
for  scheduled rent increases during the term of the lease.  Rent is expensed on
a  straight-line  basis  over  the  term  of  the  lease.

     INCOME  TAXES -Income taxes are accounted for using the asset and liability
method,  under which deferred tax assets and liabilities are determined based on
the  difference  between  the  financial  statements and tax bases of assets and
liabilities  using  enacted  tax  rates  currently  in  effect.

     STOCK-BASED  COMPENSATION  - The Company accounts for stock-based awards to
employees  using  the  intrinsic  value  method  in  accordance  with Accounting
Principle  Board,  (APB),  No.  25,  Accounting  for  Stock Issued to Employees.
Accordingly,  no  compensation  cost  has  been  recognized for the stock option
awards  granted at fair market value.  Through 2001, the Company granted options
at  85%  of  fair value and recorded compensation expense equal to the intrinsic
value over the vesting period.  The Company has recorded compensation expense of
$238,000  in  2000,  $305,000  in  2001,  and  $290,000  in  2002.  Statement of
Financial  Accounting  Standards,  (SFAS),  No.  123, Accounting for Stock-Based
Compensation,  requires  the  disclosure of pro forma net income and earning per
share  as  if  the  Company had adopted the fair value method.  Had compensation
cost  for the Company's stock option plans and ESPP been determined based on the
fair value at the grant date consistent with the provisions of SFAS No. 123, the
Company's  net income would have been reduced to the pro forma amounts indicated
below  (in  thousands):

                                      F-9
<PAGE>

<TABLE>
<CAPTION>


                                                          2000      2001      2002
                                                        ---------  -------  ---------
<S>                                                     <C>        <C>      <C>
Net income (loss) - as reported                          ($2,275)  $1,155   $  4,657
Stock-based employee compensation included in
     reported net income (loss), net of tax effects     $    143   $  183   $    174
Stock-based compensation expense determined
     under fair value based method, net of tax effects     ($833)   ($511)   ($2,295)
                                                        ---------  -------  ---------
Net income (loss) - pro forma                            ($2,965)  $  827   $  2,536
                                                        =========  =======  =========

Basic net income (loss) per share - as reported           ($0.50)  $ 0.15   $   0.43
Basic net income (loss) per share - pro forma             ($0.66)  $ 0.10   $   0.23

Diluted net income (loss) per share - as reported         ($0.50)  $ 0.14   $   0.40
Diluted net income (loss) per share - pro forma           ($0.66)  $ 0.10   $   0.22
</TABLE>


     The Company uses the Black-Scholes option-pricing model for determining the
fair  value  of  options, which requires the input of certain estimates that may
affect  what  is  deemed  fair  value.  The  existing  model may not necessarily
provide a reliable single measure of the value of its stock options.  Management
will  continue to evaluate alternative methodologies that may more appropriately
reflect  pro  forma  compensation  expense.

     Additional  disclosure  requirements  of  SFAS  No.  123,  Accounting  for
Stock-Based  Compensation,  are  set  forth  in  Note  10.

     NET INCOME (LOSS) PER SHARE - Basic net income per share is computed as net
income  (loss)  divided  by  the  weighted  average  number  of  common  shares
outstanding  for  the  period.  Diluted net income (loss) per share reflects the
potential  dilution  that  could  occur  from common shares issued through stock
options,  warrants  and  the conversion of preferred stock. Diluted net loss per
share  for  the  year ended December 31, 2000 does not include the common shares
issued  through  stock  options,  warrants and the conversion of preferred stock
because they are anti-dilutive. Anti-dilutive shares of 110,750 and 630,621 have
been excluded from diluted weighted average shares outstanding in 2001 and 2002,
respectively.

     The  following  table  summarizes  the  differences  between basic weighted
average  shares outstanding and diluted weighted average shares outstanding used
to  compute  diluted  net  income  (loss)  per  share  (in  thousands):

<TABLE>
<CAPTION>


                                             2000   2001    2002
                                             -----  -----  ------
<S>                                          <C>    <C>    <C>
Basic weighted average shares outstanding    4,515  7,941  10,919
Incremental shares from assumed exercise of
     stock options and warrants                  0    271     708
                                             -----  -----  ------
Diluted weighted average shares outstanding  4,515  8,212  11,627
                                             =====  =====  ======
</TABLE>



     The number of incremental shares from the assumed exercise of stock options
and  warrants  was  calculated  applying  the  treasury  stock  method.

     RECENTLY  ISSUED  ACCOUNTING  STANDARDS  -  In  October 2001, the Financial
Accounting  Standards  Board,  (FASB),  issued  SFAS No. 144, Accounting for the
Impairment  or Disposal of Long-Lived Assets. This statement supercedes SFAS No.
121,  Accounting  for  the  Impairment  of  Long-Lived Assets and for Long-Lived
Assets  to  be  Disposed  Of,  and the accounting and reporting provision of APB
Opinion  No.  30, Reporting the Results of Operations - Reporting the Effects of
Disposal  of  Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring  Events  and  Transactions, for the disposal of a segment of business.
SFAS  No.  144  became

                                      F-10
<PAGE>

effective  for  the  Company on December 31, 2001. Adoption of this standard did
not  have  a  material  effect on the Company's financial position or results of
operations.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with  Exit  of Disposal Activities, which addresses accounting for restructuring
and  similar  costs.  SFAS  No.  146  supersedes  previous  accounting guidance,
principally  Emerging  Issues  Task Force Issue No. 94-3. The Company will adopt
the  provision  of  SFAS  No.  146  for restructuring activities initiated after
December  31,  2002.  SFAS  No. 146 requires that liability for costs associated
with  an exit or disposal activity be recognized when the liability is incurred.
Under  Issue  94-3,  a liability for an exit cost is recognized at the date of a
company's  commitment  to  an  exit plan. SFAS No. 146 also establishes that the
liability  should initially be measured and recorded at fair value. Accordingly,
SFAS  No.  146  may  affect  the  timing of recognizing future store closure and
restructuring  costs  as  well  as  the  amounts  recognized.

     In  November  2002,  the  FASB  issued  FASB Interpretation ("FIN") No. 45,
Guarantor's  Accounting  and  Disclosure  Requirements for Guarantees, Including
Indirect  Guarantees  of  Indebtedness  of  Others.  FIN  45  elaborates  on the
disclosures  to  be  made  by  the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also  requires  that  a  guarantor recognize, at the inception of a guarantee, a
liability  for  the  fair  value  of  the  obligation  undertaken in issuing the
guarantee.  The  initial  recognition  and  measurement  provisions  of  this
interpretation  are  applicable  on  a prospective basis to guarantees issued or
modified  after  December  31,  2002;  while,  the  provisions of the disclosure
requirements are effective for financial statements of interim or annual periods
ending  after  December 15, 2002.  The adoption of the measurement of provisions
of FIN 45 is not expected to have a material impact on our financial position or
results  of  operations.

3.     INVENTORIES

     The  Company's  inventories  consist  of the following at year end 2001 and
2002  (in  thousands):

<TABLE>
<CAPTION>


                 2001    2002
                ------  -------
<S>             <C>     <C>
Raw materials   $5,722  $ 7,130
Finished goods   3,223    3,877
                ------  -------

Total           $8,945  $11,007
                ======  =======
</TABLE>



4.     PROPERTY  AND  EQUIPMENT

     Property  and equipment consists of the following at year end 2001 and 2002
(in  thousands):

<TABLE>
<CAPTION>


                                      2001       2002
                                    ---------  ---------
<S>                                 <C>        <C>
Leasehold improvements              $ 22,007   $ 23,518
Furniture, fixtures, and equipment    23,609     25,158
Plant equipment                        4,244      7,442
Construction in progress                 514      3,216
                                    ---------  ---------

Total                                 50,374     59,334
Less accumulated depreciation        (26,745)   (31,405)
                                    ---------  ---------

Total                               $ 23,629   $ 27,929
                                    =========  =========
</TABLE>


     Depreciation  expense  was  $4,990,000  in  2000,  $5,455,000  in 2001, and
$5,005,000  in  2002,  respectively.  Construction  in  progress  includes
manufacturing plant equipment, new store fixtures and other capital projects not
yet  placed  in  service.

                                      F-11
<PAGE>

5.     INVESTMENTS

     The Company invested the proceeds of the secondary public offering in April
2002  in  investment  grade  securities.  At  December  29,  2002,  the  Company
maintained  long  term  investments  classified  as  available  for  sale  of
$28,100,000.  The  long term investments are comprised of United States Treasury
Notes and Bonds, and Federal Agency notes and bonds, maturing within five years.
Gross  unrealized  holding gains were $360,000 for the period ended December 29,
2002,  of  which  $223,000 related to U.S. Treasury Notes and Bonds and $137,000
related  to  Federal  Agency  notes  and  bonds.

     The  company sold securities for net proceeds of $18,144,000 and realized a
gain  of $27,000.  For the periods ended December 29, 2002, net unrealized gains
of  $227,000  (net  of  $133,000  tax),  were  recorded  in  accumulated  other
comprehensive  income  (loss).

6.     BORROWINGS

     In  September 2000, the Company entered into a credit facility with General
Electric  Capital  Corporation.  The  facility  expires  in  September  2005 and
provides for a revolving line of credit up to $15,000,000, the issuance of up to
$3,000,000  in letters of credit, and $15,000,000 in term loans.  The term loans
were  repaid  during  2001  upon  the  closing  of  the Company's initial public
offering.  Total  availability  under the revolving line of credit is determined
by  subtracting  our  funded debt from our trailing twelve month earnings before
interest,  taxes, depreciation and amortization, or (EBITDA), multiplied by 3.75
for  the  period before September 1, 2001, 3.5 for the period after September 1,
2001 and before September 1, 2002, and 2.5 thereafter.  As of December 29, 2002,
there  was  no  outstanding  balance  and  $14,057,000  was  available under the
Company's  line  of  credit.

     Borrowings under the credit facility are secured by a lien on substantially
all of the Company's assets.  The credit facility contains covenants restricting
the  Company's  ability  to  make  capital  expenditures,  incur  additional
indebtedness  and  lease  obligations,  open  retail  stores,  make  restricted
payments,  merge  into or with other companies and sell all or substantially all
of  its  assets  and  requiring  the  Company  to  meet certain financial tests.

     Long term borrowings consist of the following at year end 2001 and 2002 (in
thousands):

<TABLE>
<CAPTION>


                                                                     2001     2002
                                                                    -------  ------
<S>                                                                 <C>      <C>
Industrial development revenue bond, interest at a weekly floating
rate of 1.65% at December 29, 2002, until maturity in 2006.          1,300     860

Capital lease obligations                                              108      32
                                                                    -------  ------

          Total                                                      1,408     892
Less current portion                                                  (513)   (468)
                                                                    -------  ------

Total                                                               $  895   $ 424
                                                                    =======  ======
</TABLE>


     Scheduled  maturities  of  the  Company's  borrowings  at December 29, 2002
(excluding  capital  lease  obligations,  see  Note  11)  are  as  follows  (in
thousands):

<TABLE>
<CAPTION>



Year:
<S>      <C>
2003     $440
2004      140
2005      140
2006      140
         ----
  Total  $860
         ====
</TABLE>

                                      F-12
<PAGE>


7.     INCOME  TAXES

     The  income  tax  provision  (benefit)  consists  of  the  following  (in
thousands):

<TABLE>
<CAPTION>


            2000   2001    2002
           ------  -----  ------
<S>        <C>     <C>    <C>
Current:
  Federal  $ (66)  $ 467  $1,470
  State      (58)      9     377
           ------  -----  ------
  Total     (124)    476   1,847
Deferred:
  Federal   (569)    133     827
  State       97     140      61
           ------  -----  ------
  Total     (472)    273     888
           ------  -----  ------

  Total    $(596)  $ 749  $2,735
           ======  =====  ======
</TABLE>


     The  difference between the effective income tax rate and the United States
federal  income  tax  rate  is  summarized  as  follows:


<TABLE>
<CAPTION>


                                            2000   2001   2002
                                           ------  -----  -----
<S>                                        <C>     <C>    <C>
Statutory Federal rate                      34.0%  34.0%  34.0%
State income taxes less federal benefit      5.8    5.8    5.8
Change in valuation allowance              (14.8)   3.7   (3.0)
Non-deductible items                        (0.6)   0.8    1.4
California net operating loss limitation    (3.6)  (2.1)   0.0
California Manufacturer Investment Credit    0.0   (2.9)  (1.2)
                                           ------  -----  -----

Total                                       20.8%  39.3%  37.0%
                                           ======  =====  =====
</TABLE>


     Deferred tax assets (liabilities) consist of the following at year end 2001
and  2002  (in  thousands):

<TABLE>
<CAPTION>


                                            2001      2002
                                           -------  --------
<S>                                        <C>      <C>
Net operating loss carryforwards           $  153   $   165
Charitable contribution carryforwards         439       269
Credit carryforwards                          861       382
Scheduled rent                                273       311
Accrued reserves                              329       436
Accrued compensation                          267       319
State taxes                                    43        68
                                           -------  --------
           Gross deferred tax assets        2,365     1,950
                                           -------  --------
Property and equipment                       (238)   (1,207)
Other                                                  (214)
                                           -------  --------
           Gross deferred tax liabilities    (238)   (1,421)
                                           -------  --------
Valuation allowance                          (534)     (249)
                                           -------  --------
           Net deferred tax assets         $1,593   $   280
                                           =======  ========
</TABLE>


                                      F-13
<PAGE>

     The Company has state net operating loss carryforwards of $1,867,000, which
expire between 2004 and 2007.  A valuation allowance is provided when it is more
likely  than not that some portion or all of the deferred tax assets will not be
realized.

8.     EMPLOYEE  BENEFIT  PLAN

     The  Company's  401(k)  plan covers substantially all employees.  Employees
may contribute up to 60% of their annual salary up to a maximum of $11,000.  The
Company  matches  50%  of  amounts  contributed  by  its employees.  The Company
contribution  was  $347,000,  $413,000,  and  $438,000  in  2000, 2001, and 2002
respectively.  The  plan  does  not  offer  investments  in  Company  stock.

9.     SHAREHOLDERS'  EQUITY

     In  April  2002,  the  Company  issued  3,137,500 shares of common stock at
$14.00  per  share  of  its  common stock.  The Company received net proceeds of
$41,030,000.

     During  2001,  the  Company  issued  2,682,623 shares of stock at $8.00 per
share  in  an  initial  public  offering  of  its  common stock and received net
proceeds  of  $17,790,000. Upon the closing of the initial public offering, each
of  the  outstanding  shares  of preferred stock converted into shares of common
stock  at  a  conversion  rate  of  one to two. On January 30, 2001, the Company
amended  and  restated  its  articles  of  incorporation,  pursuant to which the
Company's authorized capital stock consists of 50,000,000 shares of common stock
without  par  value  and 10,000,000 shares of preferred stock without par value.
None  of  the  preferred  stock has been issued or designated as of December 29,
2002.

     Prior to the Company's initial public offering in January 2001, the Company
was  authorized to issue 10,000,000 shares of preferred stock without par value,
of  which  1,000,000  and 98,000 shares were designated for issuance as Series A
and  Series  B  preferred  stock  (preferred  stock),  respectively.

     In  May  of  1997,  the Company issued warrants to a consultant to purchase
200,000  shares  of common stock at $7.50 per share.  These warrants, which were
exercisable  at  the  option  of  the holder, were exercised on the first day of
fiscal  year  2002.

10.     STOCK  OPTION  AND  EMPLOYEE  PURCHASE  PLANS

     In  1994,  the  Company  established  two  stock option plans, of which one
includes  only  California  residents,  both  of which provide for incentive and
nonqualified stock options for the purchase of 831,600 shares of common stock of
the  Company.  During  1999,  the  Board  of  Directors  approved a reduction of
208,914  shares  available  under  these  plans.  Incentive stock options may be
granted  to employees of the Company.  Nonqualified stock options may be granted
only  to  employees, directors, officers, agents, consultants or advisors of the
Company.  The purchase price of the common stock issuable under the stock option
plans  is determined by the Board of Directors and may not be less than the fair
market  value  of the common stock at the grant date for incentive stock options
and  not less than 85% of the fair market value of the common stock at the grant
date  for  nonqualified stock options.  The term of a granted stock option is 10
years from the grant date.  Stock options granted through December 30, 1994 vest
20%  on  each  anniversary  of the employee's date of hire and, accordingly, are
fully  vested  and  exercisable  after  five years of employment.  Stock options
granted subsequent to December 30, 1994 generally vest over three to four years.

     In  1997,  the  Company  adopted  a  successor equity incentive plan to the
Company's  existing stock option plans, which provides a means by which selected
employees,  directors, and consultants of the Company may benefit from increased
stock  value  through  the granting of incentive and nonstatutory stock options.
The  Company has reserved 1,280,000 shares of common stock for issuance pursuant
to  the plan. The purchase price of the common stock issuable under this plan is
determined  by  the  Board of Directors, however may not be less than 85% of the
fair market value of common stock at the grant date. The term of a granted stock
option  is 10 years from the grant date. Stock options generally vest over three
to  four  years.

     In 2000, the Company adopted a new stock option plan (effective January 24,
2001).  The  Company  had  reserved  700,000 shares of common stock for issuance
pursuant  to  the  plan.  As  of  each  annual  meeting  of  the

                                      F-14
<PAGE>

Company's  shareholders, beginning in 2002, and continuing through and including
the  annual  meeting of the Company's shareholders in 2010, the number of shares
of  common  stock  reserved  for  issuance under the 2000 plan will be increased
automatically  by  the  lesser  of (i) three percent (3%) of the total number of
shares  of  common  stock  outstanding  on such date, (ii) five hundred thousand
(500,000)  shares,  or (iii) a number of shares determined by the Board prior to
such  date,  which number shall be less than (i) and (ii) above. At the May 2002
annual  meeting,  the shareholders approved an amendment to the plan to increase
the  aggregate  number  of  shares  of  common  stock authorized for issuance by
800,000  shares  and  to  increase  the  annual  increase of shares reserved for
issuance  from  3%  to 5%. The purchase price of the common stock issuable under
this  plan is determined by the Board of Directors, however may not be less than
85%  of  the  fair market value of common stock at the grant date. The term of a
granted  stock option is 10 years from the grant date. All stock options vest at
a  minimum  rate  of  20%  per  year.

     The  Company  also  adopted a 2000 Non-Employee Director Plan that provides
for  the  automatic  grant  of  nonstatutory stock options to purchase shares of
common  stock  to  non-employee  directors which is administered by the Board of
Directors (effective January 24, 2001). The aggregate number of shares of common
stock that may be issued pursuant to these options under the plan is 330,000. As
of  each  annual  meeting  of the Company's shareholders, beginning in 2002, and
continuing  through  and  including  the  annual  meeting  of  the  Company's
shareholders in 2020, the number of shares of common stock reserved for issuance
under  the  2000 plan will be increased automatically by the lesser of (i) three
quarters  of  one  percent (0.75%) of the total number of shares of common stock
outstanding on such date, (ii) sixty thousand (60,000) shares, or (iii) a number
of shares determined by the Board prior to such date, which number shall be less
than  (i) and (ii) above. The exercise price of options granted will be equal to
the  fair  market value of the common stock on the date of grant and have a term
no  more  than ten years from the date granted. Option grants vest over a period
of  three  years  from  the date of grant. In 2001 and 2002, the Company granted
non-employee  director  options  to purchase an aggregate of 120,000 and 110,000
shares  of  common  stock,  respectively.

     As  of  December  29,  2002, there were no shares available for grant under
1997  stock option plan, 350,593 shares available for grant under the 2000 stock
option  plan, and 160,000 shares available for grant under the 2000 Non-Employee
Director  stock  option  plan.  Changes  in  stock  options  were  as  follows:

<TABLE>
<CAPTION>


                                                WEIGHTED-AVERAGE
                                    OPTIONS      EXERCISE PRICE
                                  OUTSTANDING       PER SHARE
                                  ------------  -----------------
<S>                               <C>           <C>
Outstanding at January 2, 2000      1,347,930   $            5.68
Granted                               280,750                7.27
Canceled                              (37,600)               5.75
Exercised                              (2,872)               4.64
                                  ------------

Outstanding at December 31, 2000    1,588,208                5.96
Granted                               729,326                7.69
Canceled                              (52,601)               6.96
Exercised                             (94,081)               5.39
                                  ------------

Outstanding at December 30, 2001    2,170,852                6.54
Granted                             1,344,719               14.97
Canceled                              (48,637)               9.81
Exercised                            (541,162)               6.03
                                  ------------

Outstanding at December 29, 2002    2,925,772   $           10.47
                                  ============
</TABLE>


                                      F-15
<PAGE>

     At  December 31, 2000, December 30, 2001, and December 29, 2002, 1,202,493,
1,392,087,  and  1,428,323  options,  respectively,  were  exercisable  with  a
weighted-average  exercise  price  of  $5.54,  $5.93,  and  $7.05, respectively.

     The  following  table summarizes stock option information at year end 2002:

<TABLE>
<CAPTION>

                           OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                           -------------------                         -------------------

    RANGE OF      NUMBER OF       WEIGHTED-AVERAGE               WEIGHTED-AVERAGE   NUMBER OF  WEIGHTED-AVERAGE
EXERCISE PRICES    OPTIONS   REMAINING CONTRACTUAL LIFE           EXERCISE PRICE     OPTIONS    EXERCISE PRICE
<C>               <C>        <C>                         <S>     <C>                <C>        <C>
$  3.85 to $6.38    962,739                        5.16   years  $            5.93    953,668  $            5.93
$ 7.23 to $10.20    633,779                        8.24                       7.90    402,851               8.04
$11.11 to $14.90    269,518                        9.21                      12.07      7,639              11.11
$15.49 to $15.49    854,736                        9.42                      15.49          -               0.00
$16.41 to $17.00    205,000                        9.47                      16.65     64,165              17.00
                  ---------  --------------------------                             ---------  -----------------
$ 3.85 to $17.00  2,925,772                        7.74                      10.47  1,428,323               7.05
                  =========  ==========================                             =========  =================
</TABLE>

     During  2001,  the  Company  adopted  a  2000  Employee Stock Purchase Plan
("ESPP"),  where eligible employees can choose to have up to 15% of their annual
base  earnings  withheld  to  purchase the Company's common stock.  The purchase
price  of  stock  is 85% of the lower of the beginning of the offering period or
end  of the offering period market price.  The Company authorized 200,000 shares
of  common  stock available for issuance under the plan, which will be increased
as  of  each  annual meeting of the Company's shareholders, beginning 2002 until
2020,  by the lesser of 200,000 shares or 1.5% of the number of shares of common
stock  outstanding  on  that  date.  However,  the  Board  of  Directors has the
authority to designate a smaller number of shares by which the authorized number
of shares of common stock will be increased on that date.  During 2002 and 2001,
employees  purchased  82,865  and  36,789 shares, respectively, of the Company's
common  stock  under the plan at a weighted-average per share price of $6.86 and
$6.80,  respectively.  At December 29, 2002, 259,171 shares remain available for
future  issuance.

     The  weighted  average fair value of the stock options granted during 2000,
2001,  and 2002 was $2.91, $6.56, and $9.42, respectively.  The weighted average
fair  value  of each 2001 and 2002 ESPP award was $3.91 and $3.84, respectively,
per  share.  The  fair value of each option grant and ESPP award is estimated on
the  date  of  grant  using  the  Black-Scholes  option-pricing  model  with the
following  assumptions:

<TABLE>
<CAPTION>


                          2000   2001   2002
                          -----  -----  -----
<S>                       <C>    <C>    <C>
Expected dividend rate       0%     0%     0%

Expected volatility
     Options                 0%  77.6%  68.1%
     ESPP awards                 77.6%  68.1%

Risk-free interest rate
     Options              6.33%  4.88%  3.79%
     ESPP awards                 4.24%  1.87%

Expected lives (years)
     Options                 5      5      5
     ESPP awards                  0.5    0.5
</TABLE>



     See  Note  2 for the pro forma effect of accounting for stock options using
the  fair  value  method.

                                      F-16
<PAGE>

11.     COMMITMENTS  AND  CONTINGENCIES

     LEASES  -  The  Company  leases  its Emeryville, California coffee roasting
plant,  distribution  center  and  administrative offices, warehouse, its retail
stores  and  certain  equipment  under  operating  leases  that expire from 2003
through  2012.  Certain leases contain renewal options for an additional five to
fifteen  years,  and  also  provide  for  contingent rents to be paid equal to a
stipulated  percentage of sales.  The lease agreements also provide for periodic
adjustments  to  the  minimum  lease payments based on changes in cost of living
indices  or  other  scheduled  increases.

     Future  minimum  lease  payments  required under non-cancelable capital and
operating  leases  subsequent  to  December  29, 2002 are as follows (amounts in
thousands):

<TABLE>
<CAPTION>


                                              CAPITAL   OPERATING
                                              LEASES      LEASES
                                             ---------  ----------
<S>                                          <C>        <C>
Years:
  2003                                       $     29   $    5,101
  2004                                              4        4,695
  2005                                                       4,411
  2006                                              -        3,485
  2007                                              -        2,529
  Thereafter                                        -        3,781
                                             ---------  ----------

Total minimum lease payments                       33   $   24,002
                                                        ==========

Less amounts representing interest                 (1)
                                             ---------

Present value of net minimum lease payments        32
  less current obligations                        (28)
                                             ---------

Long-term obligations                        $      4
                                             =========
</TABLE>



     Rent  expense was $4,329,000, $4,738,000 and $5,077,000 for 2000, 2001, and
2002  respectively,  including  contingent  rents  of  $129,000,  $146,000,  and
$139,000.

     In  August  1998,  the Company entered into an occupancy lease agreement in
Naperville,  Illinois  for  a  term  of  10 years beginning January 1, 1999. The
Company  assigned  the  lease in August 2001 and is liable for lease payments in
the  event  the  assignee or its guarantor defaults through the end of the first
lease  term, expiring on December 31, 2008. As of December 29, 2002, the Company
may be liable for $542,000 of remaining lease payments, offset by the assignee's
security  deposit  of  $6,000 and its guarantor's maximum liability of $313,000.
See  Note  2.

     PURCHASE  COMMITMENTS  -  As  of  December  29,  2002,  the  Company  had
approximately  $18,149,000  of outstanding coffee purchase commitments from 2003
to  2006  with  fixed  prices.

     EMPLOYMENT AGREEMENTS - The Company has agreements with certain officers to
provide  severance  benefits  in  the event their employment is terminated under
certain  defined  circumstances  resulting in a contingent liability at December
29,  2002.

     LEGAL  PROCEEDINGS  -  The  Company  is  party to various legal proceedings
arising  from  normal  business activities. In February and March 2003, a former
and  a  current  store  manager  have  each filed a lawsuit with potential class
action  certification,  against  the  Company.  They allege misclassification of
employment  job  classification.  The  Company  is  investigating and intends to
vigorously  defend  this  litigation,  but  because  the  cases are in the early
stages,  the  financial  impact  to  the  Company,  if any, cannot be predicted.

                                      F-17
<PAGE>

12.     HEDGING  ACTIVITIES

     The  Company  is  exposed to price risk related to price-to-be-fixed coffee
purchase  commitments and anticipated coffee purchases.  The Company uses coffee
futures  and  options  to manage price increases and designates these derivative
instruments  as  cash-flow  hedges  of  its  price-to-be-fixed  coffee  purchase
commitments  and  anticipated  coffee  purchases.  The  Company does not hold or
issue  derivative  instruments  for  trading  purposes.

     On  January  1, 2001, the Company adopted Statement of Financial Accounting
Standards  ("SFAS")  No.  133, Accounting for Derivative Instruments and Hedging
Activities.  SFAS  No.  133,  as  amended,  establishes accounting and reporting
standards  for  derivative instruments, including certain derivative instruments
embedded  in  other  contracts,  and  for  hedging  activities. All derivatives,
whether  designated in hedging relationships or not, are required to be recorded
on  the  balance  sheet  at  fair  value.  If  the derivative is designated in a
fair-value hedge, the changes in the fair value of the derivative and the hedged
item  will  be  recognized  in  earnings.  If  the derivative is designated in a
cash-flow  hedge,  the  effective  portions  of changes in the fair value of the
derivative will be recorded in other comprehensive income and will be recognized
in  earnings  when  the  hedged  item  affects earnings. Ineffective portions of
changes  in  the  fair  value  of cash-flow hedges are recognized immediately in
earnings.

     The  adoption of SFAS No. 133 on January 1, 2001 resulted in a liability of
$1,304,000 representing the fair value of the open futures at January 1, 2001, a
deferred  tax  asset  of  $519,000  and  accumulated other comprehensive loss of
$785,000  net  of  tax.

     During  2001  and  2002,  the  effective  portion  of  the cash-flow hedges
amounted  to a loss of $295,000 (net of $195,000 tax) and a gain of $66,000 (net
of $38,000 of tax), respectively, and was recorded in other comprehensive income
(loss).  The  ineffective  portion  of  the  hedges  of $169,000 and $27,000 was
recorded  as  cost  of  sales  during  2001  and  2002,  respectively.  Other
comprehensive  income  (loss),  net  of  tax,  was  ($407,000) and $38,000 as of
December  30, 2001 and December 29, 2002, respectively, all of which is expected
to be reclassified into cost of sales over the next twelve months as the related
inventory is sold.  For the years ended December 30, 2001 and December 29, 2002,
$673,000  and  $379,000 of coffee futures losses included in other comprehensive
loss  were  reclassified  into  cost  of goods sold.  The fair value of the open
futures  contracts  as  of  December  30,  2001  and December 29, 2002 was a net
liability of $112,000, and a net asset $31,000 respectively, and is reflected in
other  liabilities  and  prepaid  assets.


                                      F-18
<PAGE>

13.     SEGMENT  INFORMATION

     Beginning  in 2002, the Company operates in two reportable segments: retail
and  specialty  sales.  Retail  store  operations consist of sales of whole bean
coffee,  beverages,  tea  and  related  products through Company-operated retail
stores.  Specialty sales consist of whole bean coffee sales through online, mail
order,  grocery,  wholesale  and  office  coffee  accounts. Management evaluates
segment performance primarily based on revenue and segment operating income. The
following table presents certain financial information for each segment. Segment
income  before  taxes  excludes  unallocated  marketing expenses and general and
administrative  expenses.  Unallocated  assets include cash, coffee inventory in
the  warehouse,  corporate  headquarter assets and intangibles and other assets.
Prior  to 2002, the Company reported three segments, which have been restated to
reflect  the  current  presentation.

<TABLE>
<CAPTION>


                                   RETAIL   SPECIALTY    UNALLOCATED     TOTAL
                                   -------  ----------  -------------  ---------
<S>                                <C>      <C>         <C>            <C>
2000
  Net revenue                      $68,322  $   15,980                 $ 84,302
  Depreciation and amortization      3,556         497  $        523      4,576
  Segment operating income (loss)    6,782       4,565       (12,311)      (964)
  Interest expense, net                                        1,907      1,907
  Loss before income taxes                                               (2,871)
  Total assets                      18,547       1,631        19,543     39,721
  Capital expenditures               3,578         974           966      5,518

2001
  Net revenue                      $75,055  $   19,345                 $ 94,400
  Depreciation and amortization      3,659         737  $        642      5,038
  Segment operating income (loss)    8,963       4,904       (11,534)     2,333
  Interest expense, net                                          429        429
  Income before income taxes                                              1,904
  Total assets                      17,676       3,886        19,847     41,409
  Capital expenditures               1,882       1,321         3,308      6,511

2002
  Net revenue                      $78,300  $   25,773                 $104,073
  Depreciation and amortization      3,193         878  $        497      4,568
  Segment operating income (loss)   11,618       6,829       (11,595)     6,852
  Interest income, net                                           540        540
  Income before income taxes                                              7,392
  Total assets                      20,753       4,330        70,062     95,145
  Capital expenditures               4,930       1,332         3,090      9,352
</TABLE>


     Net  revenue from external customers for the two major product lines are as
follows:


<TABLE>
<CAPTION>


                                                      2000     2001      2002
                                                     -------  -------  --------
<S>                                           <C>    <C>      <C>      <C>
Whole bean coffee, tea, and related products         $50,290  $55,944  $ 62,583
Beverages and pastries                                34,012   38,456    41,490
                                                     -------  -------  --------
                                              Total  $84,302  $94,400  $104,073
                                                     =======  =======  ========
</TABLE>


                                      F-19
<PAGE>

14.     RELATED  PARTY  TRANSACTIONS

     A  member  of  the Board of Directors is the Chairman of Jesse.Hansen&Co, a
strategic  and financial advisor to the Company pursuant to an engagement letter
dated  as  of  December  9,  1996  between Jesse.Hansen&Co and the Company.  The
Company paid Jesse.Hansen&Co $60,000 ($5,000 per month) in fiscal 2000 and 2001,
and  $30,000  in  2002  for  advisory  services.  This advisory relationship was
terminated  in  June  2002.

15.     QUARTERLY  FINANCIAL  INFORMATION  (UNAUDITED)

<TABLE>
<CAPTION>

                                                      QUARTER ENDED
                                                      -------------

                                     MARCH 31,     JUNE 30,   SEPTEMBER 29,   DECEMBER 29,
                                       2002          2002          2002           2002
<S>                               <C>              <C>        <C>             <C>
Net revenue                       $       24,456   $  24,889  $       25,366  $      29,362
Income from operations                       805       1,024           1,809          3,214
Net income                                   488         718           1,279          2,172
Basic income per share            $         0.06   $    0.06  $         0.11  $        0.18
Diluted income per share          $         0.05   $    0.06  $         0.10  $        0.17

                                                      QUARTER ENDED
                                                     --------------
                                  APRIL 1,         JULY 1,    SEPTEMBER 30,   DECEMBER 30,
                                            2001        2001            2001           2001

Net revenue                       $       22,568   $  22,727  $       22,715  $      26,390
Income (loss) from operations               (308)        158             822          1,661
Net income (loss)                           (304)         64             430            965
Basic income (loss) per share     $        (0.04)  $    0.01  $         0.05  $        0.12
Diluted income (loss) per share   $        (0.04)  $    0.01  $         0.05  $        0.11

</TABLE>

                                      F-20
<PAGE>