PERKING UP BUSINESS

RICHARD TURCSIK

Whole beans, new varieties and exotic flavors are brewing in the coffee aisle. The growth of coffee bars -- which have introduced consumers to lattes, frappes, cappuccinos, mochaccinos and other unusual drinks -- has boosted sales of whole beans and flavored blends, retailers told SN.

"Our unit sales for the coffee category are up over 5% from last year," said Chris Ahearn, corporate communications manager, Food Lion, Salisbury, N.C.

"To boost our sales even further, we are attempting to promote larger sizes of cans more often, and also to promote entire lines of coffees," Ahearn added.

"To increase our coffee sales we are offering more variety," concurred Mike Shultz, senior vice president, Hughes Family Markets, Irwindale, Calif.

"We are having more promotions on our ground and whole bean coffees. We are also entering the coffee bar world, via our service delis and bakeries, where we are offering the new-age beverages that have gained so much attention," he said.

A&P's Eight O'Clock brand has a solid business that continues to grow, said Michael Rourke, senior vice president, communications and corporate affairs, for the Montvale, N.J.-based chain, which sells Eight O'Clock coffee to other retailers through its Compass Foods subsidiary.

"We are into all of the new flavored coffees and have a complete line. Eight O'Clock is an outstanding brand," Rourke said.

The smell of freshly ground coffee emanating from the large red grinders at the front of the store has been an A&P hallmark for generations.

"Eight O'Clock is the No. 1 whole bean coffee in the country. We now sell more of it outside the company than we sell inside, mostly in markets where we do not operate stores," Rourke said. Sales are especially strong in regions where A&P once operated stores, but has since pulled out of the market, such as Chicago and St. Louis, Rourke added.

In the Pacific Northwest, private-label whole bean lines are doing well for Spokane, Wash.-based Rosauers Supermarkets. The 17-unit chain devotes 16- to 20-foot sections -- which is about the same amount of space that it devotes to ground coffees -- to the Millstone, Seattle Best and Rosauers Finest brands.

Rosauers has been having success with its Rosauers Finest premium brand coffee for the past six months, said Pat Redmond, buyer.

"We don't price it off of Millstone very far because it is a premium quality. It is usually priced about 50 cents a pound under Millstone or $1 a pound under Seattle Best," he said.

The retailer's whole bean sections are currently doing much better than its ground coffee sections, Redmond said.

"The whole bean is fresher and there is that perception of quality," he explained. "Out here we live in the shadow of Starbucks, so whole bean coffees have become a way of life."

Though whole beans are showing promising growth potential at Food Lion, brick packs continue to be a dominant force, said Ahearn. "Cans are beginning to become more of a factor as we attempt to promote the larger sizes, however, instant coffees continue to show declining results," Ahearn said.

While whole beans, flavors and stronger roasts are gaining in popularity, the coffee industry has had a case of the jitters in recent years. Brazilian frosts of two years ago wreaked havoc on prices, causing many consumers to cut back on their coffee drinking. The growing popularity of new-age beverages is also a factor, as they continue to steal a bigger gulp of the beverage dollar.

According to Information Resources Inc., Chicago, for the 52-weeks ended Sept. 8, 1996, ground coffee sales totaled $1.9 billion, a 13.7% decline from the previous year. Much of the decrease stemmed from price declines coming off of the previous year's price hikes. Unit volume declined by 2.3% to 532.1 million units.

Ground decaffeinated coffee fared a little better, showing a 1.2% unit decline to 80.5 million units and a 9.5% dollar decline to $344.9 million.

Retailers said the nation's coffee roasters need to advertise their product more heavily if it is to regain market share.

"Strong manufacturer advertising and couponing show a positive impact on coffee sales," said Ahearn of Food Lion.

"Manufacturer promotions help sell the product. We believe there will be more promotions this year as prices decline," said Shultz of Hughes Markets.

"What has really influenced [the sales decline] more than anything is Procter & Gamble moving to an everyday low-price [strategy] and that there are no promotions to speak of. Nobody is putting any money out for ads," said Redmond of Rosauers.

Because of the sales decline, Rice Food Markets, Houston, has shrunk the size of its coffee departments, said Vern Buford, director of grocery merchandising.

"We carry the different blends, the different flavors and the cappuccinos, but this is not a trend that we as a retailer can change. It is something that society has changed in its habits," Buford said, adding that even the manufacturers have reduced the size of their cases from 24 cans down to 12 on the 13-ounce size, and from 8-packs to 6-packs on the 39-ounce size.

Redmond of Rosauers holds out some hope for a line of new ready-to-drink coffee drinks recently introduced by Nescafe.