Monday, October 3, 2005

Will Caribou's Islamic parentage raise eyebrows?

Caribou Coffee doesn’t sound Muslim, as indeed it’s not. But a controlling interest in the company is held by Arcapita Bank, which had switched to that name from the potentially inflammatory First Islamic Investment Bank. Regardless of what it’s called, the institution operates in accordance with shariah, or Islamic law. And that, as Motley Fool contributor Stephen D. Simpson noted in a posting this afternoon, could be an issue with U.S. shareholders of the newly public coffee chain.

Simpson speculates that there could be two areas of concern. The first is how shariah could hamper operations. The ethical code sets rules for borrowing money, which “might impair the company's access to quick sources of capital,” Simpson wrote. Similarly, he noted, the chain could be denied the go-ahead for new products that are not permitted under Islamic law.

That, Simpson observed, will probably not be a problem for a limited-menu coffee chain. But Arcapita also reportedly holds a sizeable stake in the Church’s fried-chicken chain. Items like bacon or other pork cuts may not be so far a field for a concept like that. They could not be offered under shariah.

The other risk to Caribou, said Simpson, is “flat-out” ignorance. “Islam is not exactly well understood in this country, and there are a lot of people who go into knee-jerk reactions when they hear the word,” he wrote.

But the connection between Caribou and Arcapita nee First Islamic has been a topic of discussion on the internet for years. The relationship was even reported on, the popular site that collects urban legends, with an indication of whether each is true or not. The 2002 installment confirmed that First Islamic held a controlling stake in Caribou. “Starbucks, here I come!” remarked the site’s content controller.

A Caribou spokesman did not respond to a request for comments.


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