Trade publication Grocery Headquarters muses on the gourmet coffee and tea phenomenon. Shock president Jeffery Rosen gets interviewed and offers his two beans.
A sip of variety
By Jessie Male.
Coffee and tea drinkers are enthusiastically embracing the ever-increasing number of options pouring out of supplier companies.
The phrase “coffee bar” has taken on a whole new meaning in recent years. No longer does a consumer go to the coffee and tea aisle and debate nothing more than whether to buy decaf or regular. Now there are hyper-caffeinated, flavored and limited-edition coffees. Tea comes in red, white, black and green. Fair Trade and organic are impacting both categories, bringing a sense of social responsibility, as well as variety, to the section. Selecting the right kind of tea and coffee has become like choosing a fine wine. Consumers can stick with old favorites, be adventurous or pick something simply to impress their friends.Coffee consumption is on the rise. According to the 2006 market research report National Coffee Drinking Trends, the number of American adults who drink the beverage daily is up, from 49% in 2004 to 53% in 2005 to 56% in 2006. “Coffee is becoming more than a morning staple. It is becoming a treat, an event, even a social outlet. I think that dynamic is what is driving it,” says Joseph DeRupo, director, communications and public relations for New York-based National Coffee Association. Tea is on the same trajectory. An article in The Wall Street Journal Online noted that there are 2,000 tea houses nationwide, up from 200 a decade ago. And, according to the Tea Association of the USA, tea sales reached 6.2 billion last year. This is more than quadruple the numbers from the early 1990s. “There is an increased interest in quality, diverse choices and the story behind the product,” says Rodney North, who calls himself the Answer Man and works for West Bridgewater, Mass.-based Equal Exchange.To give credit where credit is due, Starbucks is a large part of this transformation. “They have taken regular coffee and turned it into gourmet coffee,” says Jeff Rosen, president of New York-based Shock Coffee. The consumer acceptance of high quality for a high price has transferred from shop to store. “If someone can go into a store and pay $5 for a cup of coffee, they can pay six bucks for a bag of coffee,” adds Tim Blazek, national account executive for Batavia, Ill.-based PapaNicholas coffee.Younger consumers are certainly buying into this. National Coffee Drinking Trends reports that daily consumption of coffee by consumers between the ages of 25 and 39 has increased from 38% in 2004 to 47% in 2006. The proportion among those 18 to 24 years of age rose to 31% this year from 16% in 2003. “Young people want a status symbol, so they want to drink what will make them associated with premium brands,” says Blazek. Joe Beauprez, senior director of marketing for Boulder, Colo.-based Celestial Seasonings, a division of the Hain-Celestial Group, notes that young people are attracted to hot, innovative trends in flavors. “When we launch something like acai berry tea, we are going into an area that the youth are drawn to,” he says. “That is not something that was in their mother’s cupboard 30 years ago. That is something that can be theirs.”
TWO DEMOGRAPHICS
TJ Whalen, vice president of marketing for Green Mountain Coffee, based in Waterbury, Vt., says younger consumers play an important role in a consumption reformation, where change can be evoked through a purchasing decision. Noting the rise in Fair Trade and organic beverages, he says, “There are two ends of the distribution curve where it is strongest: younger consumers who really have the opportunity to be perhaps principled in their purchasing decision and the baby boomer segment, because you have a little bit of a higher level of disposable income.”Throughout the industry this is seen not as a trend but rather as an evolution. “You see this taking root in a lot of consumer segments. You see this in the cars they are buying, you see it in the choices people are making, in the growth of organics,” says Whalen. “Consumers are casting their vote with their wallet.” About half of Green Mountain’s total selection is Fair Trade certified and a large portion is organic. “These coffees are seeing much higher rates in growth than our conventional offerings,” Whalen says.The integration of the Fair Trade market has been part of the mission of Equal Exchange since its inception in 1986. Since then, the company has expanded from coffee into tea and hot cocoa. In the third quarter of 2006, its tea line will double and loose teas will be introduced.“We find our customers asking, ‘We love Fair Trade coffee, do you have Fair Trade tea?’” North adds. “One goal was not only to do business this way but to demonstrate that Fair Trade was viable. We want people to enter the Fair Trade market.” Considering the steady growth in suppliers and participating manufacturers, North says the mission is on the path to success.
ORGANIC CERTIFICATION
Officials at Harrison, N.Y.-based Massimo Zanetti Beverage USA, which markets brands like Chock full o’Nuts and MJB Premium Coffee as well as private label, recently announced that a manufacturing facility in Suffolk, Va. was approved as a certified operator to produce organic coffees by Quality Assurance International, an independent, third-party certification group. “This is telling the consumer that from the materials through the product the integrity has been maintained,” says Felix Venezuela, vice president of operations and supply chain. “There is credibility to the process.”Organics are a small part of a much bigger picture of good health. “This is the beginning of a change where people understand that they need to be a little more proactive. They want fewer pesticides; less refined sugars in their bodies; less trans fats,” says Beauprez. Though coffee has recently had positive publicity for its high level of antioxidants, the health factor is a huge driver for tea. “Well-being in general is a big influence that is helping tea,” says Stephen Twining, director of corporate relations for Andover, England-based Twining Tea. “It is something that people are aware of, particularly with green tea.” However, he adds, white, black and red teas are becoming better known for their anti-oxidant properties.Twining adds that tea not only affects the body, but the mind as well. “When you have a cup it always delivers. When it is hot, it will cool you down; when you are cold, it will warm you up; when you are feeling down in the dumps, it will cheer you up, and when you are feeling too excited, it will bring you down,” he says.These mixed emotions can hit all sides of the industry as winter rolls in. In the case of retailers and manufacturers, stress levels rise. For coffee and tea, summer is the calm before the storm. “Sales in the winter for coffee are maybe 40% higher, or more, than they are at their slowest point in the summer,” North says.The holidays provide ample opportunity to keep the coffee selection exciting and fresh. Limited editions overflow in the aisles. “For a long time we had four seasonal offerings, and they were so popular we introduced a fifth season,” says Whalen. Green Mountain flavors include Autumn Harvest Blend and Island Coconut. Frosty’s French Vanilla and Chocolate Candy Cane are among PapaNicholas seasonal blends. “We are seeing a big opportunity in truly unique flavors,” says Beauprez. Goji berries are one unusual ingredient Celestial Seasonings is using. “People are looking for exotic, foreign and adventurous experiences.” Coffee and tea manufacturers advise that this ability for the products to tell a story and evoke emotion has considerable marketing potential. “We suggest retailers include signage and other communication tools like shelf talkers to convey the benefits to these products,” Whalen says. North notes that this is particularly pertinent in Fair Trade. “There is the human story and there is the quality. Fair Trade pays the farmer and deals with the farmer directly. This leads to excellent quality,” he says.
INCREASING SELECTION
Because there is such heightened interest in coffee and tea, the most common suggestion to expand market share is to increase the size of the category. “I don’t think that most people make tea a destination aisle,” says Beauprez. “When you look at a store like Wegmans, they have taken tea and made it a priority. Their tea sections are enormous.” If space allows, retailers should put up coffee kiosks. “There is fabulous profit potential in a cup program,” says Whalen. “But make sure the coffee you are offering by the cup translates in the bag or on the shelves.” North notes that larger stores have cashed in on the café culture by creating sit-down areas.Industry leaders assure that there is abundant opportunity in the coffee and tea category. “I go back with specialty tea now almost exactly 13 years, and this is the most exciting time that I can remember,” Beauprez says. “We see substantial and sustained growth in Fair Trade, organic and specialty coffee,” North adds. “But you can’t succeed in these categories unless you are serious about it.”
