Keep Sales Brewing
Although store brands have been playing in the U.S. single-cup coffee segment for only a short time, they have been experiencing tremendous growth during that timeframe. In fact, single-serve coffee came out No. 1 among food and beverages on Store Brands’ 2014 Movers and Shakers list, which features categories and subcategories in which store brands achieved year-over-year dollar and unit sales growth of 5 percent or more and dollar sales of $5 million or more.
The list shows store brand single-serve coffee posting 234.9 percent and 236.2 percent gains in dollar and unit sales, respectively, for the 52 weeks ending May 18. What’s more, private brand dollar sales during that timeframe — $246.2 million — represented less than 3 percent of overall single-serve coffee subcategory sales, suggesting strong continued growth opportunities going forward for value-oriented store brand alternatives to pricey Keurig K-Cup packs.
Trends with traction
When it comes to current trends within the single-cup coffee segment, the growing popularity of the convenient subcategory likely is the most significant. According to “Coffee in the US,” a May report from London-based Euromonitor International, fresh-ground coffee pods continue to drive value growth in the coffee category, increasing by 34 percent in retail value terms to reach $2.7 billion in 2013.
Also playing out on the trend side is a continuing push toward value and variety, notes Billie Rice, vice president of sales for Trilliant Food & Nutrition, Little Chute, Wis.
“Most private label single-cup programs are under $6 per 12-count box, which is significantly lower than their national brand counterparts,” she notes. “Also, variety in the single-cup format is what consumers are looking for — origin coffees, flavored coffees, caused-based coffees, along with the seasonal cocoas and cappuccinos, hot and iced teas, and functional beverages.”
Trends on the horizon
Looking ahead, a few smaller trends show signs of becoming bigger on the store brand side. Bulk sizes such as 42-count and 80-count packs are one such trend, Rice says.
“These allow retailers to offer a bulk value with hot price points,” she notes. “For example, a retailer [can] buy the 42-count size and retail it for under $15 while making a 35 to 40 percent margin. This, compared to a Green Mountain 18-count retailing at $11 to $12, offers a significant savings per cup.”
Another up-and-coming trend is the “2.0” lid technology, Rice says, referring to the need for single-serve formats to work with the new Keurig 2.0 Brewing Technology.
“Most manufacturers have ‘cracked the code’; however, it is a new trend all private label manufacturers and retailers need to address,” she says.