After losing the battle for the thirsts of an entire generation of soft-drink lovers, Procter & Gamble Co. wants to teach the next generation about coffee.

        The maker of Folgers and Millstone, despite a big cutback in its food-and-beverage unit, says it can grow the two brands by concentrating on new consumers in their 20s and veterans who have been drinking coffee for years.

P&G's Mike Griffith and Greg White partake in "cupping" to taste a variety of coffees. (Greg Ruffing photo) | ZOOM |

        Plans don't yet include selling coffee overseas, said Mike Griffith, president of global beverages at Cincinnati-based P&G. But they do include new flavored versions of the mainstream Folgers coffee and new packaging for its gourmet-brand sister, Millstone.

        “We lost a generation to soft drinks,” Mr. Griffith said. “It was brilliant marketing by soft drinks ... But it's all about growth, and we think there are substantial growth opportunities out there.”

        Some investors have been urging P&G to exit the food-and-beverage business for a decade to concentrate on its core consumer-products markets, and the company moved in that direction earlier this year by shedding Jif and Crisco. But it apparently has decided to try to use its strengths in consumer research and global sourcing to keep competing in the coffee business.

        Folgers provides a substantial base. The brand, a market leader among mainstream coffees, is one of P&G's billion-dollar brands and produces a bulk of the food-and-beverage unit's profits, which totaled $384 million in the just-completed fiscal year.

        Dating to 1850, it is P&G's oldest brand, and it was sold in its trademark red can as early as 1890.

        Folgers is the only one of P&G's billion-dollar brands sold exclusively in North America. Mr. Griffith acknowledged the potential for overseas expansion and said P&G was evaluating every opportunity, but would not comment further.

        Millstone, which P&G acquired in 1995, has reached $175 million in sales and is the company's entrie into the trendy world of gourmet coffee, a market growing at close to 10 percent a year.

        Together, the brands make P&G the U.S. leader in coffee, with a market share of about 34 percent over the last year, according to market-watcher Information Resources Inc. The IRI numbers do not include Wal-Mart Stores.

        The basis for P&G's hope is simple: Younger Americans are drinking more coffee. According to P&G, consumption by those aged 20-24 increased 78 percent from 1995 to 2002, and consumption in the 25-29 age bracket jumped 24 percent.

        That provides an opportunity that trend-conscious P&G is determined to exploit. For Folgers, it will be expanding the base of consumers who drink 85 million cups of the coffee every morning. For Millstone, it's a matter of marrying P&G's consumer research with the still-strong trend toward gourmet coffee.

        “We're a very attractive coffee company to most retailers because we hold out the prospect for growth in the category,” said Jim Hartung, Millstone's brand manager.

Slurp and spit

        Procter's coffee operation starts in small rooms in New Orleans and Cincinnati, where teams of employees sit around tables with several dozen cups of freshly ground coffee.

Proper "cupping" requires sipping coffee from spoons in a particular way so as to absorb all of the flavor and aroma. (Greg Ruffing photo) | ZOOM |

        In a process called “cupping,” they slurp coffee made from beans around the world, then spit into a large metal spittoon. A sample from every shipment of Folgers beans is tested this way in New Orleans, while a group here tests the beans harvested for Millstone.

        Eight employees in Cincinnati went through 18 months of training to learn how to test coffee for acidity, body and aroma.

        The beans are harvested mostly by hand in Asia, Africa and Latin America, and then shipped to New Orleans, where P&G's roasting plants are located. Procter buys about five million 60-kilogram bags of coffee beans per year, more than 100 different types of coffee from more than 30 countries, said Greg White, director of green coffee.

        The specifics for the two brands are different - the Millstone beans generally are bigger and more expensive -and four traders in Cincinnati are buying beans from different sources at prices that can change up to 20 cents per pound in a single day.

        P&G generally passes on the changes in raw coffee costs to the consumer, so the price of Folgers and Millstone on the store shelf can change constantly.

        “As the market moves, we obviously are trying to get the best value we can,” Mr. White said. “But the first thing we care about is good taste. We will make it taste that way, no matter what it costs.”

"Message hasn't changed'

        From there, P&G's vaunted marketing machine takes over. Folgers is among the best examples of that, with only two campaigns in nearly four decades. The historic Mrs. Olsen campaign was replaced in 1984 with the “Best Part of Waking Up” tagline that remains today.

        “Every brand manager who comes in here has been tempted to think about a new approach, but when you get into it, it really works,” said Matt Carcieri, Folgers brand manager.

        There is a bit of a new approach at Folgers, hoping to push

        the edges of the mainstream brand with new hazelnut and French vanilla brands that are shipping to stores now. That follows the Cafi Latte product introduced several years ago and a partnership with Suiza Foods Corp. a year ago that produced the chilled coffee Jakada.

        More than two-thirds of coffee drinkers want multiple forms of coffee during the day, Mr. Carcieri said. And more than two-thirds of coffee is consumed by people 55 and over. While the mainstream coffee market is flat now, he sees the potential for double-digit growth there as well, and the new products are an attempt to position Folgers for that growth.

        For Millstone, the category growth already is there. That has helped P&G triple Millstone sales since 1995, Mr. Hartung said.

        Millstone still is delivered directly to stores by P&G trucks, in contrast to most of its products, including Folgers, which are delivered through a central distribution hub. That maintains the freshness and quality that gourmet coffee drinkers demand.

        Still, Millstone is available in only 70 percent of outlets, including supermarkets and drugstores, and added 4,000 new outlets during the just-completed fiscal year, Mr. Hartung added.

        “We stand to benefit from that (retail expansion),” he said.

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