Tully's loses its CEO, 4 others

As part of a mass exodus of key personnel, Chief Executive John Buller abruptly quit at the financially struggling Tully's Coffee Corp., the company said Tuesday.

Seattle-based Tully's, long in the shadow of Starbucks, is replacing its CEO with Carl Pennington Sr., a former Albertsons executive who will become president and a member of the board.

"I'm excited about joining them. It's a great company with a great brand," said Pennington, whose family runs seven Tully's franchises in Boise, Idaho. "I want to get in and make the company a little more efficient and institute some good business practices so we can grow the bottom line."

The 69-year-old Pennington also is a board member of Boise-based Impact Sales, a grocery broker for Tully's. He becomes the sixth leader to run the company since founder and Chairman Tom O'Keefe gave up the CEO job in early 2001. Pennington said he would report directly to the board.

Along with Buller, the company has lost Chief Financial Officer Kristopher Galvin, General Counsel Andrew Mun and Vice Presidents Rob Martin and Dana Pratt. Martin and Pratt left the company Friday.

Tully's said it was reducing its corporate staff by 14, after last year's delayed initial public offering.

The company said the changes, including the hiring of a new CFO and supply chain general manager, will "move the company forward in its efforts to become profitable." The company has posted an annual profit just once in its nearly 16-year history.

Buller -- who, according to two sources, was at odds with O'Keefe over the direction of the company and how to stop financial losses -- was traveling and could not be reached Tuesday.

The former University of Washington alumni director was hired in August 2006 to replace John Dresel, who lasted less than two years and received $200,000 in severance.

O'Keefe was traveling in Switzerland and could not be reached, according to a spokesman.

Pennington, a former minor league baseball player, said he signed a one-year contract with a rollover clause. Financial terms were not disclosed.

"I will be here until the job is done," Pennington said. "The big thing is getting the right people in place, and we are doing that."

When asked what he would do to make the company profitable, Pennington said by instituting strong business practices, "we will get it turned around."

The company did not disclose whether Buller, who made $200,000 annually, and the other executives who left would receive severance compensation.

Buller's contract calls for him to receive $500,000 if he's fired "without cause" before Feb. 21. It wasn't disclosed whether Buller resigned or was fired.

Since O'Keefe stepped down, the longest any top executive lasted was just more than two years, with one CEO lasting five months.

It was unclear why CFO Galvin, who earned $175,000 and had been with the company since February 2002, also resigned. He declined to comment Tuesday.

When Buller was hired, he said the company would work to peel off customers from Starbucks. During Buller's brief tenure, same-store sales increased but the company continued to lose money.

For the most recent quarter that ended Sept. 30, Tully's lost nearly $3.3 million on sales of $20.9 million. For fiscal 2007, which ended April 1, the company lost $9.8 million on sales of $61.9 million.

O'Keefe founded Tully's in 1992 as an alternative to Starbucks. But as its rival became a global icon that now has more than 15,000 stores in 43 countries, Tully's continued to flounder.

Tully's has incurred annual net losses since its inception, except for fiscal 2006, when Tully's was profitable after the one-time sale of intellectual-property assets.

During the last few years Tully's has flirted with going public, but the company postponed efforts in August because of a volatile stock market. O'Keefe last week said Tully's remains in a "rain delay" for its initial public offering.

Also last week, Tully's announced that it had entered into a partnership with a Singapore company to open Tully's stores in Asia, Australia and New Zealand. On Tuesday, Pennington said the company would work to have additional franchise operations in U.S. supermarkets. The company has about 140 retail stores in five states.

Coincidentally, Buller's departure comes just eight days after Starbucks fired Chief Executive Jim Donald and replaced him with Howard Schultz, the Starbucks chairman.

Tully's also said Andrew Wynne has been promoted to vice president and chief financial officer, and John Rader has joined the company as vice president and general manager for supply chain.

Wynne, formerly the company's controller, has been with Tully's since 2005. Rader brings 35 years of experience in food manufacturing and distribution, most recently serving as the president of SoCal Bakeries in Santa Ana, Calif.

TULLY'S REVOLVING DOOR

Since founder Tom O'Keefe gave up the CEO job in early 2001, the coffee company has run through five top executives. A sixth boss took over Tuesday. A list of the leaders:

Feb. 2001-July 2001: Jamie Colbourne, CEO

July 2001-May 2002: Marc Evanger, interim CEO

May 2002-July 2004: Tony Gioia, CEO

Nov. 2004-Aug. 2006: John Dresel, president

Aug. 2006-Jan. 2008: John Buller, CEO

Jan. 2008: Carl Pennington Sr., president