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.