WHY and HOW THE COFFEE KINGS ARE LOSING THEIR POWER

"How is it that Maxwell House and Folgers, a decade ago the unrivaled kings of coffee, ended up on the back burner? The short answer is Starbucks -- or, more accurately, a cultural shift in how Americans drink coffee that has largely been driven by its ilk. Although Folgers and Maxwell House still control the bulk of supermarket ground-coffee sales, the total $29 billion coffee industry has become more about grabbing a paper cup on the way to work rather than brewing coffee at home. Coffee shops In 2001, Datamonitor estimated that retail channels, including supermarkets,drug stores and discount clubs, accounted for 50% of U.S coffee sales. But by the end of 2006, that share had fallen to 34%. Meanwhile, the total market climbed more than 50% during the same period, according to Datamonitor, and is expected to grow another $10 billion to $39 billion by 2011, driven mainly by coffee shops."It's a complete shift in thinking by the consumer," said Lauren DeSanto, analyst with Morningstar. "You suddenly had premium coffees come available, and people responded well, by really opening their wallets."Not only are people drinking anywhere from one- to two-thirds of their java outside the home, but specialty brands are increasingly invading the supermarket aisles that were once the purview of Maxwell House and Folgers."

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And they are seeing success:

Brands such as Newman's Own, Intellegentsia and GreenMountain are all gaining market share, largely at the two titans' expense.Patrick Schumann of Edward Jones said the old reliable brands aren't likely to pick up any lost sales. "The brands that have been established as being higher quality really are the brands that are going to be able to show continued momentum," he said.Note to Kraft and P>ranslation: If Kraft and Procter & Gamble want to save, rather than sell, their coffee businesses, they're going to have to make a product their own executives will drink."These companies don't throw very many people at it," said Dan Cox, presidentat coffee-tasting service Coffee Enterprises, who worked with McDonald's to turnaround its coffee business in 2005. "What does their president drink? It doesn't work unless it comes from the top down."Mr. Cox pointed to the boots-on-the-ground efforts of regional roasters and their tendency to hire people who are passionate about coffee. P&G and Kraft, by comparison, rely more on TV advertising than the grass-roots marketing that has built brands such as Starbucks.But even traditional ad outlays have fallen for one supermarket stalwart. Kraftspent only $17 million on Maxwell House last year, according to Ad Age'sLeading National Advertisers report, down more than 33% from $25.6 million theyear before. Folgers, meanwhile, spent about $73 million in measured media --up more than 137%.

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For P&G, which controls 35% of the ground-coffee market -- valued at $2 billionin food, drug and mass merchandisers excluding Wal-Mart, according to Information Resources Inc. -- the outlook is somewhat sunnier than at Kraft,which IRI said holds 34%. P&G also owns Millstone, which has had fair success in the grocery channel, and is licensing the Dunkin' Donuts name for asupermarket brand. "We saw an opportunity to drive incremental growth with agreat-tasting brand that has high customer loyalty," said Folgers spokesman Bryan Brown.Folgers' latest effort Folgers launched an ad campaign this summer from Publicis Groupe's Saatchi &Saatchi, New York, featuring Chandra Wilson from "Grey's Anatomy" and TV journalist Lisa Ling.P&G's total coffee sales were $727 million for the 52 weeks ended July 15, IRI said. Yet lingering production problems from Hurricane Katrina (P&G's facilitiesare in New Orleans) and increasing commodity prices have made business difficult and a sell-off likely. Kraft, meanwhile, has announced that it's switching its coffee blend from cheaper robusto beans to fuller-bodied Arabica. "We believe it's going to put Maxwell House on a new growth trajectory," said spokeswoman Bridget MacConnell. Kraft also has a licensing agreement to market Starbucks-branded coffee ingrocery stores. According to the company, its Starbucks grocery business grew8% in 2006 and has already risen 11.4% percent in 2007. But according to IRI, Kraft's Starbucks-brand whole-bean sales in supermarkets totaled $108 million in the 52 weeks ended July 15, just a fraction of Maxwell House's $697 million. So why, then, if Starbucks is selling briskly in street-cornershops, aren't consumers buying more of it at the supermarket to brew in their kitchens? Home brewing "Most consumers have a difficult time making a decent cup of coffee at home,"Mr. Cox said. "They don't own commercial brewing equipment and they're impatient."That makes all the more serious signs that Maxwell House has been flagging.The company sold its Texas roasting facility earlier this year, and activistshareholders have been pushing for divestments.(Source: AdAge.com (8/20/07)

WOW! That is incredible, What is this shift in public perception and buying habits all about?  What is the next step? Where is the market heading now. I feel like there may be a solution to this and so much more! A great tasting coffee that has the potential to change lives literally! With the growth in public education through the internet, thus you found me didn't you? The next evolution is here...................

Joe Tillman

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