STRONG BLEND

RUSSELL REDMAN

When it comes to flavored coffee, nothing attracts shoppers like the wafting aroma of the fresh-ground variety. But retailers are taking steps to make sure that packaged products grab their attention, too.

A number of supermarkets are merchandising packaged flavored coffee with the whole-bean, grind-it-yourself coffee to snare extra coffee sales via the latter's nasal and visual appeal.

"Flavored coffees are doing very well," said Pat Redmond, grocery merchandiser at Rosauers Supermarkets, Spokane, Wash. "I think what's really triggered it is the explosion of whole-bean flavored coffees, which are expensive. You can get almost the same flavor in the instant flavored coffees without all the fuss, and they're a little less expensive.

"Our whole-bean coffee is right at the end of our regular coffee section, and the packaged flavors are right next to the whole-bean. And we have espresso syrups and all [other coffees] in the same area," he said.

The demand for gourmet coffee -- regular and flavored -- has been brewing, as evidenced by the proliferation of specialty cafes and coffee bars. That has spilled over to supermarkets, which have seen a cavalcade of new flavored coffee products in self-service bins and on shelves. At a Pacific Northwest chain, packaged flavored coffees "have cut a niche," and space for them has been expanded, taking some facings away from regular coffee products, according to one of its grocery buyers. Stores average 20 stockkeeping units in 4 feet of shelf space for the category, he said.

"With the abundance of new items and new flavors, it's definitely a growing category," said Nick Wedberg, vice president of sales at Plumb's Inc., Muskegon, Mich.

Plumb's carries only packaged flavored coffee. "The SKUs are cut right into the coffee section, which varies anywhere from 12 to 24 feet in our stores," Wedberg explained. Space for the flavored segment has grown over the past year, "I'd say by probably a good 20%," he said.

Consumers have continued to show a thirst for flavored coffee. For the year ended March 11, soluble flavored coffee jumped 13.6% in dollar sales at supermarkets, according to A.C. Nielsen, Schaumburg, Ill.

Much of the demand has been fueled by the proliferation of new flavors. "It's growing in the number of items offered," said Carl Willoughby, assistant general manager at Ream's Food Stores, Salt Lake City. Packaged flavored coffee and whole-bean flavored coffee bins are in the same aisle. "We try to keep them all together," Willoughby said.

"We're seeing more and more new flavors. We've taken the bottom sellers and replaced them with the new ones," the buyer from the Pacific Northwest chain said. Besides reduced-price advertising for the category, the chain has tied in packaged flavored coffees with displays of regular coffee, he said.

Pointing out new product entries has been a key in drawing customer attention to the packaged variety. "We have 'New Item' signs on it," Plumb's Wedberg said.

Most of the retailers contacted by SN said the whole-bean flavored coffee generates more sales. However, in doing so, it helps merchandise its packaged counterpart -- which may or may not be displayed nearby -- by fostering increased awareness of flavored coffee overall.

"When a customer grinds a pound of vanilla bean coffee or hazelnut coffee, you smell it throughout the store. One [customer] sends another one over," said Mel Weitz, president of Melmarkets Inc., Garden City, N.Y. The Foodtown retailer's fresh coffee bins are in the deli department, he said.

The buyer from the Pacific Northwest chain also is seeing more sales of the whole-bean variety. "That's really where the growth has been," he said. "We actually have that in line with our coffee sets. It's adjacent to the regular coffee."

Flavorings have helped lift coffee sales as well, he added. "What's really affected the business have been the flavorings for coffee. We've seen more growth as a result of the Carnation and International Delight flavorings for regular coffee. That's had more of an impact for us in the grocery department than the actual flavored coffees."

The rise in flavorings, though, has been a resourceful guide in managing turnover of packaged flavored coffee items, he noted. "We're trying to link it with how well some of the flavorings have done."

Redmond of Rosauers said there's "quite a bit" of flavor turnover of the packaged item, of which the chain displays 30 to 35 SKUs on four or five shelves in about 2 feet of space.

"They get an indication from the whole-bean [coffee] which flavors are hot, and they end up in the instant coffee," he explained. Popular flavors have been Irish creme, Kahlua and Kona. "The only thing I've seen different lately in the flavored coffees is the single-serve envelopes," he said.

Houchens Industries, Bowling Green, Ky., carries packaged and whole-bean flavored coffee, but it plans to focus on the latter, according to buyer Eric Bratcher.

"We're going to put in the A&P-brand Eight O'Clock Coffee and see how well it goes," he said. "It'll be a 4-foot section with new grinders and new racks in 42 of our stores."

Not all stores offer flavored coffee, Bratcher noted. "We don't have it in all of our stores because we have a lot of rural stores," he explained.

One goal in expanding flavored coffee sales has been broadening its appeal to consumers.

About 4% of coffee consumed at home is flavored, according to the 1995 Winter Coffee Drinking Study by the National Coffee Association of U.S.A., New York.

The NCA report found consumers drink all coffee primarily at home and during the winter. "Usually around Thanksgiving and Christmas you sell more flavored coffee," Melmarkets' Weitz said. Consumption of flavored coffee is skewed demographically and regionally. Females with a college education and those ages 30 and over are the chief flavored-coffee consumers, the NCA study reported. In the West, 6% of the coffee consumed at home is flavored, compared with 5% for the Northeast and 3% for the South and North Central regions, the study said.

That regional "bias" is reflected in flavored coffee sales at Byrd Food Stores, Burlington, N.C. "I would say they're only fair, probably because we're in the South and people don't drink as much coffee, let alone flavored," said buyer Tom Hughes.

Stores in the chain's city markets, such as Raleigh, N.C., get more demand for the flavored variety. "When you get into rural areas, the people just aren't exposed to it," Hughes said.

"You're going to find a big difference between the urban market and the rural market," noted Steve Reynolds, director of purchasing at Lem Markets, South Boston, Va. "The urban markets tend to be a little more trendy, with the upper-scale customers and preppy customers."

Consumers who have acquired a taste for flavored coffee will pay more for it, Byrd's Hughes said. "People who buy it aren't concerned with the price. I think in getting people to try it, though, the price is a problem. Once they have it and like it, they're willing to pay for it."

Some retailers voiced concern that flavored coffee's hot sales growth may cool. Unit sales rose only 2.4% in the year ended March 11, compared with double-digit growth in previous years, according to Nielsen.

"I think it's a fad," Melmarkets' Weitz said. However, the whole-bean variety has more staying power, he noted, adding that packaged flavored coffee could benefit from more advertising support. "I don't think the [manufacturers] are promoting it enough. I don't think they're demonstrating it enough," he said.

That hasn't been the case at Plumb's. "[Manufacturers] have done a lot of advertising and have introduced a lot of new items," Wedberg said. "Some of the manufacturers have had some co-op money for us to put [their flavored coffee] in an ad, and that always increases sales."

At Rosauers, flavored coffee advertising has been stepped up. "It used to be something you did only in the fall," Redmond said. "Now we do it probably once a quarter. It's no longer just a fall business; it's a year-round business."

Houchens' Bratcher said the category has established itself. "It's become a trend," he said. But the segment likely will experience some retrenching, Ream's Willoughby said. "Like everything else, it will get too many kinds and brands, and you'll have to go down to what you really need. But it will always be available."

Flavored coffee will sustain its expansion, according to Rosauers' Redmond. "They're here to stay, and they'll continue to grow. They're an impulse item. However, once somebody's been exposed to them, they'll shop and try the different flavors. They'll buy a variety."