GOURMET COFFEE MAKES U.S. SUPERMARKET DEBUT
Shoppers who buy Haagen-Daas ice cream,
Dijon mustard or Tuborg beer on their weekly trip to the
supermarket are soon to be the target of a promotional blitz
for national-brand "gourmet" coffees.
    General Foods, the largest U.S. coffee roaster, and A and
P, which shares the third place in the U.S. market, are the
only two national brand roasters so far to introduce the
higher-quality coffees into selected supermarkets.
    But industry insiders believe there is substantial growth
potential in upscale coffee, despite years of flat sales in
regular ground roast types.
    "I would suspect General Foods will make a name for
themselves with their gourmet line," said a coffee trade
source. "What it could do is really dent the small-store,
whole-bean business," the trade source added.
    The new lines are designed to appeal to a classic
advertising composite--the "yuppie" consumer.
    They buy fresh pasta, subscribe to Bon Appetit magazine and
were "first on their block with a wok," as described by Karin
Brown, General Foods senior product manager for its new coffee,
called Private Collection out of GF's Maxwell House division.
    Paul Gallant, president of A and P's Compass Foods
subsidiary that makes the new A and P gourmet line, described
its potential appeal as "a status thing."
    At an initial price of 4.99 dlrs for 12 ounces it is
expensive, though not more so than high quality coffee sold in
small specialty stores. General Foods' Maxwell House Div. has
just cut the price on its new offering by 50 cents to 4.49 dlrs
for 12 ounces--a move competitor A and P is bound to imitate,
according to an A and P executive.
    Number two U.S. roaster Folgers has "nothing to announce at
this point" in the gourmet line, a spokesman said. Neither does
Hills Bros., a subsidiary of Nestle that shares the third and
fourth size market spot by volume with A and P.
    Competitors believe Folgers will watch the progress of
General Foods' offering, prepared to jump in if the market
takes off.
    General Foods and A and P hope their new products will help
push coffee sales out of the doldrums. Coffee consumption in
the United States has fallen 44 pct since 1962, according to a
1986 study by the International Coffee Organization. Sales show
no signs of picking up.
    Compass's Gallant blames the falloff on declines in coffee
quality since the 1960's and aggressive soft drink marketing.
    "The national brands began to cheapen the blend in the name
of profit but spent 100 mln dlrs a year telling consumers this
was quality coffee," Gallant said.
    As a result, first time consumers never got a taste for the
brew. The first time a young consumer tries coffee, "they turn
around and say 'My God this is awful, I think I'll have a
Coke'," he said.
    Having now mostly written off the 16-25 age group, who have
confirmed their loyalty to soft drinks, coffee marketers are
aiming at the high income, free-spending, self-treating crowd
-- the yuppie composite.
    "Where else are you going to go?," an industry source said.
"Kids aren't going to drink coffee, that's apparent. There are
no other markets. The only area that's not been promoted is
gourmet," he said.
    In addition to perking up sales, success in the gourmet
line could provide much higher margins to roasters than regular
ground roast coffees produce.
    Generally, retail prices are about twice the price of
green, unroasted coffee beans, taking into account the costs of
roasting, packaging and distribution, and then deducting
often-generous trade discounts. Supermarkets tend to sell
coffee near the trade price as a "loss leader," a product
designed to draw shoppers into the store.
    But with the new gourmet lines, a different pricing
structure prevails, industry sources said. There is no trade
discounting and an emphasis on expensive packaging, including a
special valve designed to keep the beans fresher.
    Dealers said roasters were buying the higher quality green
beans at about 1.60 dlrs a lb. Thus, retail prices on gourmet
coffee are now almost three times the price of green.
    Targetted consumers seem willing to pay the difference.
General Foods claims 80 pct of consumers in their test market
surveys for Private Collection came back for more.
    And product manager Brown points to the success of more
expensive beers, mustard and ice cream, that began selling in
restricted high income areas and are now available in almost
every supermarket in the country.
    A and P is similarly optimistic. "We think we'll do
extremely well in the gourmet market," Gallant said.
    Maxwell House is marketing its eight types of Private
Collection in selected high income areas, while A and P offers
its 14 different whole bean gourmet coffees, called 8 O'Clock
Royale, only in their own stores in Philadelphia, Baltimore,
New York, Atlanta and some other metropolitan areas.
 Reuter
