Beans or Leaves
Private label manufacturers need to stay innovative to drive coffee and tea sales.
U.S. coffee and tea drinkers continue to look for convenience, variety and varying jolts of caffeine. But demographic changes mean that private label coffee suppliers and retailers, in particular, will need to be innovative and ready to influence younger consumers’ habits.
SymphonyIRI Group’s report for the year ending March 18 shows total U.S. FDMx (supermarkets, drugstores and mass merchandisers, excluding Walmart) coffee sales up 20.1 percent from the year before to $4.7 billion. Total private label coffee sales for the same period rose 17.7 percent to $439 million.
Among both national brands and private label, the sharpest increases came in the sales for single serve coffee, with total sales of single serve growing 119 percent to $601 million. Private label single serve sales exploded, posting a whopping 25,830 percent sales increase to $590,741.
“K-cups are still popular,” says Angelo Orichhio, chairman and CEO of Paramount Coffee Co. in Lansing, Mich., in a dry understatement.
Jerry Gilbert, vice president of retail sales for Mississauga, Ontario-based Mother Parkers Tea & Coffee, agrees. The “single-serve phenomena is having the greatest impact” on the market, and along with bringing a new level of convenience to the category, it offers something vital: “the ability for consumers to easily explore new blend and taste profiles,” he says.
This exploration will be key as private label coffee roasters and retailers look for ways to lock younger Americans into a consistent coffee habit on par with those of Baby Boomers.
Euromonitor International’s March 28 report, Tea in the U.S., states that 2011 retail sales for tea increased by 6 percent to $2 billion. Unit prices increased by 5 percent, “as tea manufacturers attempted to differentiate and move away from tea being a commodity.”
Mintel’s July 2011 report on tea and ready-to-drink tea (RTD) in the U.S. showed that tea and RTD tea sales reached $4.3 billion in FDMx and convenience stores, and forecast inflation-adjusted growth of 37 percent to $6.5 billion from 2011-16.
Mintel notes that the strongest segments of the market are the RTD canned or bottled tea and refrigerated tea.
Brad Miller, president of Carrington Tea, says he sees caffeine-free herbal teas overtaking green teas “because the Baby Boomer population is shying away from caffeine.”
Euromonitor predicts continued consumer interest in health benefits.
“The recent trend of blending other teas (white, rooibos and oolong) with familiar fruits, and reports of their high antioxidant levels, will attract additional consumers to these tea products,” its report says.
Baby Boomers continue to be the largest segment of coffee drinkers, but there are far fewer Millennials, Americans born in the 1980s and 1990s. More important, Millennials don’t drink as much coffee as Boomers. Instead, they reach for energy drinks for their caffeine. As a result, private label coffee suppliers and retailers need to develop innovate ways to reach this demographic and persuade it to embrace a consistent, life-long coffee habit.
But how can you creatively market private label coffee? One way is to tout your green or sustainable product. Paramount Coffee’s brand line includes Fair Trade Rwandan in both beans and ground, which consumers can also buy online at Amazon.com. Sustainable packaging can be important, too.
“Last year, we changed our canned coffee containers from tin to composite that is much more sustainable,” says Mother Parkers’ Gilbert. “It has received overwhelming positive reaction from both our customers and the consumers.”
Not everyone is convinced. Tom Kriegsmann, vice president of retail sales for Indianapolis-based Copper Moon Coffee cautions that “sustainable packaging has an additional cost and comes in the form of additional production expenses. I believe several retailers are ready to embrace this type of packaging, but not as willing to accept the additional costs associated with it because they do not believe it is of significant interest to the consumer, particularly during a recession.”
Knowing your particular consumer is key, and both private label coffee roasters and tea suppliers say that working closely and transparently with stores, which know their customers best, is the way to ensure success.
Kriegsmann says that although standard blends such as Breakfast, Columbian, House and French Roast “continue to provide the majority of sales” for Copper Moon, his customers find regional coffees, including Sumatra and Ethiopian, are increasingly popular, as are “Hawaiian or island grown-coffee such as Kona.”
He adds that “as with wine and craft beer, there is always a segment of consumers that want to try something a bit different, have developed a more sophisticated taste, and enjoy a non-traditional taste profile.”
To capture consumer loyalty, it helps to work directly with retailers to boost shelf appeal.
“Most private brand packaging is bland,” says Carrington Tea’s Miller. “Carrington uses boxes, pouches, and cans, each with their own sustainability qualities.”
He says the best supplier-store relationships work when stores “let the manufacturer handle the package design costs rather than an outside party charging an exorbitant fee.”
Copper Moon designs store brand coffee labels “with very clear images that illustrate the product in addition to the product name,” Kriegsmann says, such as its French Roast package featuring the Eiffel Tower.
Whether a private label retailer’s objective is improving its product’s shelf appeal or sourcing a wider range of coffee and tea varieties, clear communication and openness count. Gilberts suggests that stores work to find suppliers who can “align on objectives and when you find those that truly want to partner and be willing to have a higher level of transparency, it builds trust.”
|Eye On The National Brands|
International Delight launched a ready-to-serve line of iced coffees earlier this spring. The line is available nationwide in mocha, vanilla and original flavors.
Hain’s Celestial announced at this year’s Natural Products Expo West that it was set to roll out new products this year, including Celestial Seasonings Sleepytime Kids Goodnight Grape herbal tea, Sleepytime Peach herbal tea, Jammin’ Lemon Ginger herbal tea, and Sweet Harvest Pumpkin black tea.
One of last year’s most successful beverage product launches was Folgers Gourmet Selection K-Cups ($58.4 million in year-one sales), according to SymphonyIRI Group’s 2011 New Products Pacesetters report.