Supermarket GROCERY Business: Java's jumping

Merchandising coffee is not the same old grind. From a Starbucks on every street corner to the Central Perk on Friends, coffee is being viewed in a whole new light. Sure, steel-rimmed cans and jars of instant still make up the bulk of supermarket offerings, but the real growth is coming from a hill of whole bean, flavored, organic, and ready-to-drink products, many of which offer retailers higher margins and dollar rings.

There are "Fair Trade" coffees that promise higher wages to poor farmers, gourmet flavored coffees that attract the Starbucks crowd, and shade-grown coffees that promise to save endangered bats. There's even a coffee that is literally for the birds—grown beneath the rainforest canopy and providing habitat for more than 150 bird species.

According to the National Coffee Association's report National Coffee Drinking Trends 2002, the percentage of U.S. coffee consumption that takes place in the home has been seesawing. It declined slightly in 2002, to 79 percent from 81 percent in 2001, which was up from 76 percent in 2000. The report found that 13 percent of the population over age 18 drank gourmet coffee beverages in 2002, down a point from 2001, but four points higher than 2000.

Lately, the only constant in the coffee aisle is a never-ending assortment of new flavors. "There definitely is a trend toward more flavors of coffee. In fact, that is the only area of the coffee category that is showing growth," says Brigid Gilmore, brand manager for Nescafe Frothe, at Nestle USA in Glendale, Calif. In October, Nestle rolled out Nescafe Frothe nationally, after successfully test marketing it on the West Coast. Available in six flavors, among them Divinely Mocha, Enchanting Vanilla, Silky White Chocolate, and Nestle Butterfinger, with a suggested retail of $3.99 for a 12-serving container, the instant product is targeting the Starbucks consumer who thinks nothing of plopping down $4.55 for a daily fix of White Chocolate Mocha Grande. "We're trying to bring the trends we're seeing with out-of-home sweet creamy coffee beverages and allow people to make them in their home at a much more affordable price," she says.

"We're looking at really invigorating the category with new flavors. We're following Starbucks," adds Gilmore. "Caramel is big this year. Every year you see new flavors coming into the category."

The category is also seeing more whole bean action. A&P has sold its Eight O'Clock brand in whole-bean form for well over a century, but suddenly the oldest form of coffee is once again the most fashionable. Kraft Foods is merchandising its Maxwell House Premium Cup line of whole bean and roast-and-ground coffees in Chicago and along the East Coast. Premium Cup is made from 100-percent Arabica beans, which are considered by many to be the most aromatic and richest tasting beans grown. Packaged in bags, Premium Cup is merchandised alongside Maxwell House's familiar blue cans.

"We are offering consumers the option of being able to trade up the pyramid," says Pat Riso, a spokeswoman for Kraft Foods in Tarrytown, N.Y. "If you're a mainstream coffee purchaser, you might be interested in those 100-percent Arabica high-end coffees."

Many of those customers are also interested in Starbucks, which is distributed to supermarkets by Kraft. "Sales, marketing, and distribution is handled out of our shop, but it is Starbucks' product. It has been phenomenal for us," says Riso. The Starbucks line is merchandised from a "Starbuckian" display that prominently features the Starbucks Siren logo. Kraft is reportedly testing a combination Starbucks "boutique" display that houses Starbucks whole bean and ground coffees distributed by Kraft, along with Starbucks Frappuccino ready-to-drink beverages that are produced in partnership with Pepsi, and ice cream that is made through an agreement with Dreyers.

Supermarket mainstay Chock full o'Nuts has also gone upscale with a whole bean line. Chock has repositioned its former Café Blends under the new Chock full o'Nuts New York Classics moniker. The line's flavors are named after New York neighborhoods, like 5th Avenue French Roast and Little Italy Espresso Roast, while the packaging, created by the noted LAGA design firm, features an old New York skyline. It was judged the best coffee—even above the lofty Starbucks—in the May/June issue of Cook's Illustrated magazine. Company officials expect it to produce heavenly results at retail as well.

"Our blends are unique and speak to the neighborhoods of New York," says Jennifer Stein, brand manager, Chock full o'Nuts/Chase & Sanborn, at Sara Lee Coffee & Tea Consumer Brands in Harrison, N.Y. While the line is primarily sold in the Northeast, it is getting national television exposure through signage that was placed in Madison Square Garden this fall; the brand is also the official coffee of the New York Rangers and Knicks.

Fondness for Fair Trade

While sports fans are most accustomed to fair trades, coffee drinkers are becoming more familiar with the term. Coffee with a Fair Trade Certified label guarantees that the farmers who grew the beans are paid a fair price for their harvest, which members of democratically organized cooperatives sell direct to buyers in coffee-consuming countries. The designation also gives the farmers access to affordable credit. Coffee is the world's second most traded commodity, after oil, and prices have dropped to record lows because of overproduction and the entrance of Vietnam into the world marketplace. The Fair Trade program has been expanded recently to include tea and chocolate.

"Fair Trade is small, about one-half of a percent of the U.S. market," says Jay Molischever, director of communications at the National Coffee Association in New York.

More retailers and consumers are looking at Fair Trade coffee as another alternative. "With a global coffee crisis upon us and coffee prices at a 100-year low, we believe that, as a food company, it is our responsibility to do our part to make a difference in coffee producing communities," Perry Odak, president and c.e.o. of Wild Oats Markets recently said in a statement.

Wild Oats is stocking Green Mountain Coffee, as is the Fred Meyer division of Kroger. Green Mountain roasts and distributes about 20 double-certified coffees that are Fair Trade Certified by TransFair, USA in Oakland, Calif. and by QAI (Quality Assurance International). Green Mountain also produces the Newman's Own Organic brand.

"One of the challenges during this coffee price crisis has been that, as prices go down, farmers are walking away from their coffee, and those that are staying are unable to invest in the quality of their coffee," says Peter Peyser, director of public relations at Waterbury, Vt.-based Green Mountain Coffee. "They can't afford fertilizer, to spend as much time in the field, and they have to find other means to support themselves. So the quality of the coffee in general has been suffering."

Organic coffee is building steam. White Cloud Coffee of Boise, Idaho recently introduced its LifeFoods certified organic line, which is shade grown, free from pesticides and herbicides, and roasted in small batches on a bed of hot air to remove impurities for a crisper, cleaner taste.

Coffee has become so popular that some drinkers are going batty over it. Thanksgiving Coffee Co. in Fort Bragg, Calif. sells a line of Bat Magic coffee, which is billed as being "bat friendly" because it's grown in the shade of rainforests, preserving the leafy canopy and saving the bat habitat in the process. A percentage of the proceeds from each bag sold benefits Bat Conservation International ( and Wildlife Trust (

"In the wild, coffee grows in the shade, but commercial growers have hybridized it to grow in full sun, and that involves cutting down the rainforest," says Johanna Schultz, director, environmental & social policy, at Thanksgiving Coffee. "Shade grown coffee grows within the rainforest. Nothing is altered. And it is organic. Due to the natural systems of the rainforest, there is no need for chemical input from herbicides and pesticides. The bats eat the insects that attack the coffee plant."

What Bat Magic is doing for flying creatures of the night, Avalon Organic Coffees is doing for the birds. "Migratory birds find a sanctuary in the forest-like environment where our coffee is grown," says Randy Whitehead, president of Avalon Organic Coffees in Albuquerque, N.M. One of its products is the Zoo Brew, a line of shade grown organic coffees sold in Albuquerque-area supermarkets, with all proceeds directly benefiting the Rio Grande Zoo.
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