Retailers are hoping that the whole-bean segment can perk up sales in the coffee category, which had a less than spectacular performance last year.
Copps Corp., Stevens Point, Wis., for example, has noticed that customers are switching from prepackaged and canned coffee to whole-bean products.
"We're seeing increases in whole bean and decreases in prepackaged and canned," said Wade Bertram, category manager. "Organic is being sold in some of our markets. We've had limited success, but we're expanding it soon and adding more organic and bulk coffee."
With more people on the run these days, coffee has become one more item that is frequently purchased "ready to consume." Coffee bars and other purveyors of freshly brewed java are creating serious competition for supermarkets that must now search for new ways to revive the category at retail.
According to Information Resources Inc., Chicago, ground coffee sales for the 52-week period ended Dec. 28, 1998, dropped 8.2%, although sales were still close to $2 billion. Decaf ground-coffee sales, which were about $307 million, slipped 7.4%, while private-label ground sales slipped by almost 18%.
By comparison, five of the Top 13 brands in the whole-bean category saw increases in sales. Overall sales were $222 million in the whole-bean category, although that figure was down from the previous year, by 3.5%. Still, retailers are hoping that the whole-bean segment will increase this year.
Certain brands and companies are helping to drive the coffee industry in supermarkets -- most notably, Starbucks, which put its whole-bean coffee into supermarkets last year. The Seattle-based company then entered into a partnership with Kraft Foods in the last quarter of 1998 to distribute the Starbucks line nationwide. Sales of Starbucks coffee were up 841% in 1998, and the company sold $9.5 million in coffee in supermarkets last year.
A source at a Northwest retailer who did not wish to be identified also told SN that he is seeing an increase in whole-bean coffee sales. "Whole bean is most definitely the trend today in coffee," he said. "In the Midwest and Eastern regions, you'll find bagged coffee, with brands like Eight O'Clock and Folgers. I don't know if it's for freshness, but in the Northwest people definitely buy more bulk coffee.
"We're definitely seeing growth in the whole-bean bulk coffee," the source continued. "The coffee aisles in this chain vary by store size. The whole-bean section could be as long as 24 feet and the canned area could take up approximately 6 to 12 feet."
Although whole-bean coffee is pushing sales for the Northwest retailer, canned coffee sales are only good with a promotion, he explained. "Canned sales overall are down, but it sells well when its on promotion," the source said. "People still perceive canned coffee as a sale item only and will buy it only if there is a promotion attached to it. In fact, this week we have Yuban for $4.99.
"Millstone has peaked," he went on to say, "and now we're going into boutique coffee in geographical areas."
Boutique coffee is produced by smaller roasters and is available only to a certain number of stores in a region. Boutique brands in the Northwest include Tony's, Tulle's and K&F in Portland, Ore.
The source credits Starbucks with helping to drive sales in the whole-bean category. "Anything they do, whether it's good or bad, brings attention," he said.
"People are choosing whole bean because they perceive it to be fresher and think it tastes better. Customers also like change, and we've also become more educated about coffee," the source said.
The coffee aisle at Copps stores is divided into three sections, according to Bertram. Depending on the size of the store, approximately 24 feet are devoted to canned and prepackaged, 8 feet are given to instant coffee and shelf-stable creamers, and 8 to 16 feet are devoted to bulk. Coffee is not necessarily advertised weekly in the local papers, Bertram said, but monthly advertising is done.
Copps has done some things to make the coffee aisle more convenient and productive. "We moved all the bulk coffee into the aisle with the canned and prepackaged. The bulk coffee used to be in natural foods. Putting it in the coffee aisle has helped to increase sales in the whole-bean category," Bertram said.
Bertram also noted that Copps is working on planograms to sell general merchandise with coffee. Mugs, filters and grinders are all being worked into the plan, and coffee makers may even be added.
"Coffee has definitely been a big part of our business. It will be bigger when we get other brands like Starbucks," he added.
Dan Taylor, a category manager for grocery at Ukrop's Super Markets, Richmond, Va., said that both whole-bean and ground coffee sales are strong. "We've seen a 10% increase in tonnage," he said. "We've changed our strategy last year, by altering the pricing structure. We were too out of line with the competition, so we've chosen an everyday-low-price approach," said Taylor.
"The coffee category is price-sensitive. Consumers watch and know who has the best prices. That was a major reason for the change," he said.
As far as trends go, Taylor is seeing more and more consumers buying the larger packs of coffee. Canned sales have increased at Ukrop's, along with whole-bean coffee. "More promotional funding has gone into the 34-ounce can, and it has taken a little away from the brick pack," said Taylor.
At Ukrop's the standard coffee set is 24 feet, with 8 feet of whole bean and 16 feet of ground. Coffee has been a major part of Ukrop's business. The retailer also carries bulk coffee, which is a part of the 8-foot whole-bean section. "We sell our Ukrop's blend and some gourmet whole bean in bags and bulk. In whole bean, 80% is in bulk and 20% is in bag," said Taylor. "It has done very, very well."
Ukrop's advertises coffee in local papers. "We advertise bimonthly or every other week," Taylor said. "It's definitely a category we like to hit," added Taylor.
Taylor said the current whole-bean preference among some consumers may be a fad.
"I think it's trendy, and for consumers it's just the 'in' thing to do. More and more people are into indulgence and splurging," said Taylor. "It's the same with cigars. Cigars have exploded and have become very popular. It's like a wave. You can get on it and ride it, but how long will it be before the wave crests?"
At Country Mart, in Salem, Mo., canned coffee is still the biggest segment in the coffee category, according to Gary Medlock, manager.
"This market has more canned than anything. All canned is holding sales and we sell a little bit more whole bean than we used to," said Medlock. "We don't have any organic coffee." Medlock's Country Mart is a part of Town & Country Inc., a 48-store chain based in Salem, Mo.
The coffee section at Country Mart is about 22 feet long, with approximately 8 feet devoted to whole-bean coffee, grinders and filters. Ground, instant and specialty coffees take up 12 feet of space, with specialty coffee merchandised in about 4 feet. But, according to Medlock, one brand dominates his market.
