Friday, November 12, 1999
Starbucks' success jolts P&G to act
Ads launched for Millstone
BY RANDY TUCKER
The Cincinnati Enquirer
Procter & Gamble woke up and smelled the competition last fall when coffeehouse pioneer Starbucks began selling its gourmet coffee in supermarkets alongside P&G's Millstone brand.
Millstone, a gourmet brand founded in Seattle in 1981 and acquired by P&G in 1995, is the second best-selling whole-bean coffee in the United States, not including private labels. It ranks one spot ahead of Starbucks in the category, where A&P's Eight O'Clock whole-bean coffee is the top-selling brand.
P&G also competes in the category with its Brothers Gourmet Coffee brand, which the company acquired earlier this year.
Starbucks, which distributes coffee to more than 20,000 grocery stores nationwide through an agreement with Kraft Foods, is gaining ground on the leaders as the Seattle-based coffee roaster's store sales have percolated at a remarkable rate.
For the yearlong period that ended July 18, Starbucks' whole-bean sales rose a whopping 300 percent to $17 million, according to the Chicago-based data-tracker Information Resources Inc.
By comparison, Millstone's sales increased 14 percent to $21 million during the same period.
Starbucks and Millstone — which is sold in more than 10,000 grocery stores nationwide — also posted significant gains in the regular ground-coffee segment, where Starbucks' sales grew 400 percent to $21 million, compared with a 6 percent increase for Millstone to $15 million, Information Resources said.
True, the comparisons are skewed because Starbucks began national distribution only this year, greatly boosting its sales compared with last year when Starbucks coffee was available in stores in only a few markets in the West and Midwest.
But Starbucks success cannot be denied and has not gone unnoticed by mass-market competitors.
Just last month, P&G launched its first national ad campaign for Millstone in an effort to “make it a national brand,” Shanae Gibbs, a spokeswoman for Millstone, said.
The television, print and radio campaign, which will run through April, features several of Millstone's more than 60 varieties and is targeted at younger consumers, Ms. Gibbs said.
That's a smart move, based on a recent National Coffee Association survey that found the fastest-growing segment of coffee drinkers is young adults.
People aged 18 to 24 are said to consume an average of 4.6 cups a day — with 23 percent consuming on a daily basis — up from 19 percent in 1998, according to the survey released earlier this year.
The age bracket with the next highest consumption rate is people aged 25 to 29, who consume 4.2 cups daily, the survey said.
In addition, coffee drinkers are consuming higher-quality java, which is why many roasters are pushing gourmet brands.
“The transformation of the U.S. coffee market during the 1990s has been a radical one,” Robert Nelson, the coffee association's president and chief executive, said. “In 1999, there are 21 million daily drinkers of gourmet-coffee beverages, whereas only 4.5 million Americans drank gourmet-coffee beverages on a daily basis in 1993, when we began tracking the segment.”
Most of that coffee will be bought in supermarkets, which is why Starbucks broke with its traditional business model in the first place.
Although gourmet coffee shops have grown from about 500 in 1991 to more than 7,000 last year, they still only accounted for about 12 percent of the coffee roasted in America, according to the National Coffee Association.
Starbucks hopes to continue its success in stores by raising the brand's profile in supermarket aisles.
Starbucks said Thursday that it has signed a licensing agreement to open more than 100 coffee bars in Albertson's Inc. supermarkets. Albertson's, based in Boise, Idaho, operates more than 2,450 stores in 38 states.
SPECIALTY BRANDS GAIN
The National Coffee Association's “Coffee Drinking Trends” survey released this year shows that the percentage of Americans drinking regular coffee brands has declined, while the number drinking specialty brands is on the rise:
• Daily regular coffee consumption dropped from a high of 74 percent in 1962 to 47 percent in 1998 to 45 percent this year.
• Daily specialty coffee consumption rose 2.7 percent in 1995, 3.3 percent in 1998 and 4.9 percent this year.
Starbucks' success jolts P&G to act
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