Bulk Beans

LIZ PARKS

Demand for specialty whole-bean bulk coffee is percolating.

Although sales remain flat in mainstream supermarket channels, specialty food outlets are reporting aggressive category growth.

Bethesda, Md.-based Balducci's, for instance, is experiencing double-digit sales gains, noted John Coleman, its wine, cheese, coffee and tea buyer.

The 12-store specialty chain carries over 45 stockkeeping units of whole-bean bulk coffee, including locally roasted beans and 20 store-brand varieties.

Single-origin coffee is its fastest-growing category.

“Today, it [comprises] about 40% of our private-label coffee bean sales,” Coleman said. “Three years ago, it was 1% to 2%. Back then we carried four or five single-origins, and now we carry three times that.”

At Balducci's, blended bulk coffee is merchandised together, as are single-origin coffees, which are broken down by country of origin or region.

The retailer uses point-of-sale aids to describe the flavor profiles of coffees from various regions.

“Beans from Africa and Arabia tend to be very fruity, citrusy and floral, and those would all be together, because they have a similar flavor profile,” said Coleman. “Coffees from India and the Pacific are very heavy and full-bodied.”

Retail prices range from $7.99 a pound up to $50 a pound for such exotic coffees as Jamaica Blue Mountain, which can be subject to limited availability. Most of Balducci's offerings fall into the $7.99 to $12.99 range.

At a minimum, Balducci's bulk coffee is given a 4-linear-foot inline presentation, but in some of the stores it can occupy as much as 12 linear feet and may include endcaps or other freestanding displays.

“We model the presentation according to each store's footprint,” said Coleman.

At Seattle-based PCC Natural Markets, sales of bulk coffee “are consistently strong and at pace with overall sales in our stores,” said Stephanie Steiner, grocery merchandiser for the eight-store retailer.

All of PCC's bulk beans are 100% organic, Fair Trade Certified and shade-grown. Coffee that is grown in the shade is thought to develop desirable acids and sugars. Shade-growing also reduces the need for chemical fertilizers and herbicides.

PCC sources its bulk coffee from local distributors, who purchase and roast beans that meet quality, taste, organic, shade-grown and Fair Trade Certified criteria, said Steiner.

“We stock our bulk coffee sets with brands our customers know and trust, like Tony's Coffee, Caffe Ladro, Kalani Organica and Equal Exchange,” she noted.

To further enhance the appeal of its bulk coffee department, PCC is moving toward having all its coffee roasted locally within Washington, Oregon and British Columbia. Tony's, Caffe Ladro and Kalani Organica are currently roasted in Washington state, and PCC is arranging to have Equal Exchange coffee roasted locally as well.

Although at least one bulk coffee SKU is always on sale, PCC shoppers usually remain loyal to their favorites, Steiner said.

“If they're French roast buyers, they won't switch to a medium roast just because it's on sale.”

Bulk coffee presentations at Capers Community Market, Vancouver, British Columbia, feature 14 store-brand varieties and special-edition seasonal blends, said Bob Morisseau, regional grocery merchandiser.

Capers' bulk and packaged coffees are produced by a local roasting company, he said.

Bulk varieties are merchandised in 18 gravity-feed bins that are in an inline self-service department adjacent to the traditional coffee and tea departments.

About 50% of Capers' total private-label coffee sales come from bulk beans, and its bulk category is growing in high-double-digit increments. Prices range from $9.99 to $13.99 a pound. Its selection has featured organic coffee for over 20 years.

Last year, Fair Trade Certification became a central piece of its listing requirements, noted Morisseau.

Capers' strategy seems to be on track.

Retail sales of fair-trade coffee grew nearly 10 times, from less than $50 million in 2000 to around $500 million in 2005, according to Chicago-based Mintel's 2007 Coffee report.

“Our customers have been very happy with the program,” Morisseau said. One of the biggest sales drivers “is the aroma of the fresh beans in our stores. Plus, we frequently have promotions where we donate a percentage of total sales to various charities, and we do in-store tastings.”

Although whole-bean bulk coffee presentations can bring lucrative returns, creating a well-rounded offering can be challenging, since reliable sources who can consistently deliver superior fresh goods are hard to come by.

Balducci's works with an importer that not only helps it source “green” beans either directly or on the commodity market, but also helps the chain maintain quality-control specifications with its suppliers.

“With bulk coffee, the important thing is freshness,” said Coleman. “That's why we haven't given the category more space or brought in a wider variety of items. It also encourages our customers to buy as little as possible and brings them back to the store more frequently.”

Wells Neal, national sales director for West Bridgewater, Mass.-based Equal Exchange, also advises retailers against biting off more than they can chew.

“They may not want to give the category 8 feet and fill it up,” he said. “It might be wiser to start out with 4 feet so you can flip coffee and learn how much you are really going to sell. If consumers find themselves routinely buying stale coffee that's been exposed to the air for too long, everybody loses.”

The typical recommended shelf life on bulk beans, packaged in nitrogen-flushed bags before they're put out on the floor, is 30 to 60 days. However, Balducci's likes to limit this time to a week, said Coleman.

“They don't really go bad, but there are subtle changes in quality, and it is those subtle changes that make all the difference.”

Balducci's also merchandises more expensive coffees like a Kenya AA in smaller quantities within smaller bins.

“Promoting whole-bean coffee is all about the experience in the store,” noted Coleman. “We do a good job with direct marketing pieces, but our goal is to spend all of our money on quality and let people discover it for themselves.”

BEVERAGE WATCH

Dollar sales grew inversely to the percentage of items sold on promotion in all of the top five beverage categories.