Home Brews Hit the Grounds Running

March 11, 2009
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Though the average coffee or tea connoisseur seems to live or work only 10 paces from a Starbucks, economic troubles are causing these consumers to cut back on their lattes to-go and stick to home brews. According to a September 2008 report from Mintel International Group Ltd., Chicago, coffeehouses helped shift coffee consumption out of the home, but as the economy softens, the home coffee market will benefit as consumers look for ways to save money.

Private label coffees and teas are getting better at matching the gourmet quality of leading national brands, making store brands all the more attractive to consumers. Daniel Diebra, sales director for Maximus Coffee Group, Houston, believes that people who buy national brands such as Maxwell House or Folgers and tend to think of store brands as lower quality can be mistaken.

“For some companies, that’s not the case right now,” he says. “Wal-Mart, HEB and Publix do a good job with their coffee, sometimes even better than the national brand.”

Store brands also are trying to stand apart from national brands by being selective with their choices from private label suppliers to create unique blends and flavor profiles.

Chock Full O'Choosiness

Even though they want to save a buck or two, consumers still will be particular when it comes to choosing flavors. These days, private label consumers are basing their purchases not only on a product’s value in terms of price point, but also on taste. According to Brad Gutwein, CEO of Copper Moon Coffee LLC, Indianapolis, while store brands once were known as “generic,” they are now seen as a viable competitive force versus national brands.

“[Retailers have] become more selective in the sourcing and purchasing from their private label suppliers to arrive at flavor profiles that differentiate from the national brands,” he says.

This has helped private label coffees and teas rise above the competition. According to data from the Chicago-based market research company Information Resources Inc. (IRI), during the 52 weeks ending Dec. 28, 2008, overall ground coffee unit sales were down 1.6 percent from the previous year. At the same time, private label coffee unit sales were up 12.0 percent. Tea, both bags and loose leaf, fared similarly, with overall unit sales down 0.7 percent from last year, but with private label unit sales up 5.5 percent.

Consumers also are purchasing products with no frills attached. With the availability of more gourmet coffees from different regions of the world, consumers are passing up flavored coffees in favor of varietals. Tea drinkers are simplifying their choices, too.

“We’ve had more requests recently for private label products and teas,” says David Eben, CEO of Carrington Tea, Oradell, N.J. “Greens and herbals are the fastest moving. ... [Consumers] were getting more exotic with their flavors, [but] the more creative you get, the more the price increases. People are going back to the basics.”

According to Eben, after exotics reached their peak around the beginning or middle of last year, Carrington cut back on its exotic flavors and went back to the basics as well.

“At the end of the day, that’s what the consumer is buying,” he says.

A Healthier Brew

Though consumers are cutting back and simplifying, they are not compromising on their well-being. Consumers are buying products that complement their active lifestyles and supplement their health, especially ones rich in antioxidants and that offer all-natural flavors.

The most significant gains in coffee and tea sales came in the ready-to-drink (RTD) segment. According to the IRI data, while overall RTD cappuccino/coffee unit sales were down 12.8 percent from last year, private label cappuccino/coffee sales were up 23.9 percent. On the tea side, while overall unit sales for canned and bottled tea were up only 0.4 percent from last year, private label canned and bottled tea unit sales were up 25.3 percent.

But this is only scratching the surface of private label’s potential. According to the Mintel report, 34 percent of 18-to-24-year-olds drink energy drinks for a much-needed fix. While it seems that energy drinks have taken the younger consumer marketplace by storm, 46 percent of teens Mintel surveyed drink coffee, and 80 percent of those teens prefer sweeter, sugary coffee drinks over brewed coffee. At the same time, recent health reports regarding the overabundance of sugar and caffeine are starting to worry consumers. If private label marketers start displaying a healthier image for RTD coffee or tea, perhaps the younger consumer marketplace could be won over.

In regard to quick and easy, private label RTD coffees and teas fared well. Their gain was significant compared to the instant coffee and tea segments, which saw declines both in overall and private label unit sales. According to the IRI data, instant coffee’s overall and private label unit sales were each down 3.5 percent from last year. Meanwhile, instant tea’s overall unit sales were down 4.0 percent, and private label unit sales were down 0.2 percent.

A Greener Bean

Feeling good isn’t limited to health, either. Many coffee drinkers still want the peace of mind that comes in knowing the coffees they purchase were ethically grown and obtained.

Barbara Crowther, head of communications at London-based Fairtrade Foundation, said in an Oct. 30, 2008, Reuters article that the global financial crisis would not stop consumers from buying premium-cost fair trade coffee, and that “the public remains committed to their values when it comes to fair trade.”

Sean Pierce, president of Pierce Brothers Coffee Roasters, Greenfield, Mass., believes as the concept and understanding of fair trade become better known, consumers will make a stronger effort to seek out fair trade products, which will increase demand.

“Organic, fair trade farmers grow their crops in harmony with nature and without using harmful chemicals,” he says. “This allows consumers to know their products are healthy and safe while continuing to learn the health benefits of coffee, including antioxidants and reduced risks of type 2 diabetes.”

And as consumers become aware of terms such as “organic,” “fair trade” and “kosher certified” - as well as their benefits - packaging has to increase its strength to communicate these terms and others so consumers can pick their preferred coffee or tea easily, and continually spot it with ease in the future. More store brand packaging decisions are being made as a response to consumers’ increased desire to identify and purchase eco-friendly products.

“For the coffee industry, it allows us to inform the [consumer] of the region the coffee comes from, the roasting process, if it’s organic, fair trade or kosher certified, how to correctly portion the coffee for the best brew and even storage tips,” Pierce says.

The same goes for communicating environmental responsibility. According to Carrington’s Eben, even though the economy is in bad shape, sustainability is still an important goal. To meet this goal, Carrington developed biodegradable printable envelopes for its teabags, which it plans to have available for private label retailers by mid-summer.

For coffee, flexible packaging offers much room for innovation. As SKUs increase, so do changes in packaging design, which demands versatility in production. Retailers can ensure flexible packaging is sustainable by taking a number of steps, from printing on-bag recycling instructions to using  polylactic acid (PLA), a biodegradable and compostable plastic material made from renewable resources such as corn. In the end, a “green” package that communicates a “green” product will stand out on the shelf and grab the consumer’s attention. And overall, it can contribute to a retailer’s “green” image.

“More retailers want to be seen as contributing to sustainability and to a greener, more earth-friendly way of life,” Copper Moon’s Gutwein says. PLB

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