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Data from Chicago-based SymphonyIRI Group tell a similar story, with an 8.1 percent rise in dollar sales and a 2.3 percent increase in unit sales for the total coffee category during the 52 weeks ending April 17, 2011 (supermarkets, drugstores, and mass merchandise outlets, excluding Walmart). Private label coffee dollar sales were up a more modest 3.1 percent, although the category saw 1.6 percent decrease in unit sales.
Though some subcategories didn’t fare as well, (decaffeinated coffee, both ground and instant, and whole bean coffee all saw a drop in both dollar and unit sales, for example), other categories realized moderate to explosive growth: instant coffee grew 5.8 and 5.2 percent, in dollar and unit sales respectively, while the single cup category was up a soaring115.3 percent in dollar sales, and 96.6 percent in unit sales.
And even with coffee prices are at a 30-year high, and brands raising their own prices to keep up, dollar sales are up on ground coffee, though unit sales are slightly down. Euromonitor International points out in the February 2011 category briefing “Coffee in the US” that despite continually rising prices, coffee consumption in the States has remained positive, indicating that most coffee drinkers still view coffee as a necessary expense, rather than a luxury.
“Mainstream products like cappuccino mixes and chai tea continue to be strong even though they are not new to the marketplace,” says Desiree Mimlitsch, marketing director of the Lake Forest, California-based Big Train, Inc. “Consumers love these products and they are now a regular part of their daily routine so we see strong repeat purchases.”
Though the tea category has seen strong growth in recent years, dollar and unit sales have been flat to negative for the last 12 months in two of the three tea subcategories. The category to see an uptick is ready-to-drink (RTD) canned and bottled tea, of which private label realized a 13.7 increase in dollar sales and a 5.9 percent increase in unit sales.
Mintel reports in “Tea and RTD Teas – U.S. – May 2010” that “healthy eating and convenience are the driving forces behind growth in this market.” With RTD tea perceived as a healthier beverage alternative, manufacturers are capitalizing on tea’s widely publicized health benefits and creating new products to appeal specifically to consumers interested in teas that are organic, premium and fair-trade certified.
“Specialty brands offering either purity or premium qualities have been particularly successful, especially when their product lines are comprised of black, green, white and herbal teas in a wide range of flavors,” the report says, referring to RTD shelf-stable canned/bottled tea.
Of the many trends happening in coffee and tea, the most critical for private label product development address consumer demand for quality, variety, convenience and value.
“Private label programs have an opportunity to differentiate themselves from national brands and national brand equivalents by putting their signature on specialty products that are bold and forward-thinking,” says Steve Fay, executive vice president sales for Dakota, Illinois-based Berner Food & Beverage.
Though consumers remain very price-conscious, there is a decidedly increased interest by some segments in sustainable packaging and manufacturing and other eco-conscious labels including organic and fair trade certification.
Jerry Gilbert, vice president retails sales of Mother Parker’s Coffee & Tea, Ft. Worth, Texas, says his company is proud to have converted its metal can to a composite material that is significantly more sustainable. “We believe it provides equally relevant packaging from a product integrity standpoint and is more affordable,” he says.
Aluminum will be the future of recyclability, Fay contends, particularly in the RTD market. Trader Joe’s current four-pack of 6.5 ounce cans of its Caffe Mocha and Caffe Latte is a successful line that is also “very green,” Fay says.
Mimlitsch agrees, “We’re seeing a demand for packaging with a smaller footprint, particularly tall narrow cans for more shelf facings.”
Sky-rocketing sales in the single cup coffee subcategory suggest the trend is one that is here to stay. Though a relatively new phenomenon in North America, single cup brewers account for almost 25 percent of consumption in Europe, according to Gilbert.
“It’s stealing share from other segments and represents a seismic shift in the category that will continue to grow and impact the coffee category in a large way,” he says.
Tom Kriegsmann, vice president retail sales, of Copper Moon Coffee, Indianapolis, Ind., however, thinks the trend will balance itself in the mass consumer market where “main street America can have a super premium coffee experience and get eight to 10 more cups based on cost.” Single cup brewers – like Green Mountain’s Keurig brand – market to the top 10 percent of coffee drinkers, he says.
Still, Gilbert says retailers must focus on the right shelf-allocation. “To tell the retailers they shouldn’t carry single cup lines would be a mistake. But it brings up the question of space allocation between brands. It might make sense for a retailer to step away from tertiary value brands to drive consumers to their own private labels.”