Not Just a Cup of Joe

The Keurig brewing system continues its dominance among single-cup brewing devices within the United States. But the expiration of key patents for its namesake K-Cup Packs in 2012 has now made it possible for store brands to compete in this high-demand category. And in just a short period of time, store brands have already begun to take away market share from the name brands across the single-cup beverage category.

In response, Green Mountain Coffee, the company behind the Keurig system, is currently developing a new system — Keurig 2.0 — that will be incompatible with private label products. Given this potentially challenging state of affairs, retailers of single-cup beverages can take heart that alternatives will be made available and that they will still be able to continue their drive for market share.

“Attending the [recent] Housewares show at Chicago’s McCormick Place, I saw a number of very compelling single-cup brewers, some with innovation around improving coffee flavor, some with better countertop aesthetics and others with very low entry price points to bring in new consumers,” says Bill Meissner, president of Distant Lands Coffee’s single-serve cup manufacturing division, Tazza Pronto Systems of Renton, Wash.

The success of these systems, he adds, will further advance household penetration for single-cup products and expand the consumer’s choice. And consumers are increasingly choosing new and exciting single-cup beverage flavors to bring some variety to their day.

“We expect to see an increase of unique blends in both coffee and tea, especially seasonal limited-time offerings,” says Jerry Gilbert, vice president of retail sales for Mother Parkers Tea & Coffee Inc., with corporate headquarters in Mississauga, Ontario.

Trends in flavor variety and value are definitely on the uptick, agrees Billie Rice, vice president of sales for Trilliant Food & Nutrition LLC, Little Chute, Wis.

“[These trends] include both coffee, as well as non-coffee items such as cappuccino, cocoa and iced teas,” she says. “The brew-over-ice options for the summer months seem to be very on-trend and of interest to retailers [as well].”

The basic brews will continue to be top sellers, assures Mayer Koenig, CEO of Brooklyn Bean Roasters, South Plainfield, N.J. However, he feels that “consumers are having more fun with their coffee in this format and enjoy the interesting flavors that you don’t find anywhere else.”

Piping-hot promotion

Merchandising and promotion are an important part of any retailer’s private label offerings. But these efforts are absolutely essential to the success of a retailer’s store brand single-cup beverages.

“More than half of consumers become aware of store brand single-serve beverages through merchandising,” explains Harry Overly, senior vice president of marketing for Oak Brook, Ill.-based Bay Valley Foods LLC. “Best-in-class retailers are driving consumers to the shelf with their store brand merchandising vehicles.”

Having the appropriate carton count can help retailers stand out on the shelf.

“We have seen some of the best practices by retailers using carton count as a way to enhance total share,” Meissner explains. “Where 12-count cartons were the standard, we are now seeing many private label retailers utilize 18- and 80-count cartons on their shelves.”

These larger cartons can be an effective way for retailers to keep their shoppers from “leaking to the [warehouse] club channel,” Gilbert adds.

Retailers should not overlook the little things either, namely trial packs.

“Merchandising is all about gaining trial, [and] we think a trial pack of the cups is a great answer,” Rice explains. “Being able to purchase a small quantity of product at a reduced price point will help generate some impulse sales — especially for non-traditional or seasonal flavors.”

Another trend retailers will want to tap into on the merchandising and promotion side is that toward dual-usage occasions on the part of the heaviest coffee consumers, says Susan Lambert, business development manager for Portsmouth, Va.-based Massimo Zanetti Beverage USA. For example, a consumer here might brew a pot of traditional coffee in the morning and then enjoy a different variety of coffee later in the day in a single-cup brew format.

“To drive sales of single-serve, you need to be aware of this and leverage this dual usage by promoting store brand single-serve with store brand ground coffee in cans or bags, in a one-price mix-and-match promotion,” she says. “Store brand promotions should be pulsed in a similar frequency to national brands in order to stimulate consideration, trial and repurchase, while pricing should reflect appropriate gaps to national brands.”

And the single-cup brewing machines themselves can be an asset for those retailers willing to pursue cross merchandising opportunities.

“With more and more single-serve brew machine options available in the market,” explains Rice, “opportunities to cross-promote store brands will be more plentiful and emphasize value.”

In-store sampling occasions, too, are easier with single-cup beverages than other packaged coffee, Meissner points out.

“Setups should include the ability to allow the consumer to try their existing preferred brand against the store brand,” he suggests, “[and] usually they are shocked that the store brand tastes better.”

Messy missteps

With so much activity and excitement in the category, it is easy to see how mistakes in store brand execution can befall even the savviest retailers.

“The largest mistake we have seen in the marketplace is having too many of the same type of products on the shelf,” says Jessica Bennett, sales and marketing manager for GoldTone, a division of Manufacturers Components Inc. based in Pompano Beach, Fla. “Retailers can drive sales by adding/keeping products that offer the best features and values for the consumer.”

Trilliant’s Rice agrees, explaining that a limited assortment of private brand offerings gets lost on the shelf and also hurts credibility.

Just keeping up with the category’s pace of growth can prove challenging enough. But to get the maximum reward, retailers will need to make sure they are giving more than just the minimum effort.

“[Retailers] sometimes believe that as long as they are covering most of the roast profiles and have adequate daily shelf stock that they are optimizing the opportunity” Meissner explains. “[They] have made the mistake of not creating enough breadth of SKU offerings with their store brand items.”

Often, it’s a matter of freeing up shelf space.

“For the coffee category specifically which is growing, the most successful retailers in store brand single-serve coffee have added space to the total category in order to meet the mainstream and variety expectations of this important consumer,” Lambert says.

Employing temporary price reductions too often is another common misstep.

“Many retailers rely too much on temporary price reductions instead of off-shelf merchandising to gain trial and grow share,” Overly says.

Another area possibly getting too much of a retailer’s shelf space is single-cup tea.

“While single-cup tea outsells tea bags by a good margin and the economics are better,” Meissner explains, “the items still don’t come close to the volume from the important coffee and [other] hot beverage items.”

Future awareness

The single-cup beverage category has a lot going for it: convenience, quality and variety But these positive attributes sometimes take the focus away from one very important negative aspect of the category — its environmental impact. The standard K-Cup Packs are neither recyclable nor compostable. Billions of them are added to landfills every year.

“The opportunity for retailers to drive sales of single-serve coffee is to work with their supplier partner to develop a quality product with less packaging waste that meets the additional consumer needs of variety and price,” Lambert says.

Some environmentally responsible alternative packaging is now beginning to roll out for store brand single-cup products.

“We are introducing a new patent-pending capsule we call the EcoCup,” Gilbert says, “that allows for the filters with the tea leaves or coffee grounds to be easily separated from the plastic outer cup, which can then be recycled.”

Jon Rogers, president of Rogers Family Co., Lincoln, Calif., calls out his company’s latest packaging innovation — its OneCup Bio cups. Made primarily of corn and wood pulp, the cups are 97 percent compostable and biodegradable. The company’s ultimate goal is packaging that is 100 percent waste-free.

Reusable filters are another viable alternative to wasteful packaging.

“The GoldTone Single Serve 1-Kup Filter Kit,” Bennett says, “features the Fresh Flow aerated water disbursement system (in the filter holder lid) that evenly disburses water for maximum coffee extraction. … These types of products add value to the single-serve accessory marketplace and give retailers a new twist to this category,” she adds.

Do consider adding brew-over-ice options to the store brand single-cup beverage mix.

Don’t overdo it when it comes to temporary price reductions.

Do consider new, more environmentally friendly single-cup formats.

Don’t forget to market store brand single-cup beverages via demos and creative merchandising.