THIS JAVA'S NO JIVE

LISA SAXTON

"I love the java jive," wrote Milton Drake in the popular 1940 song called "Java Jive." Some five decades later, the country is humming his tune again to the beat of $1.5 billion in specialty coffee sales.

That figure is expected to grow to $3 billion by 1999, according to the Specialty Coffee Association of America -- and supermarkets are leading the chorus.

"Supermarkets will continue as the leading distribution channel for specialty coffees, selling 1.2 million bags, approximately one-third of all specialty coffee sales, by 1999," said Ted Lingle, executive

director of the SCAA.

Retailers contacted by SN agreed that whole-bean specialty coffee is percolating in their stores, outpacing the growth rate of commercial brands and drawing rave sales reviews.

Whole bean lines are doing especially well in specific regions, such as the Northwest, and with retailers that lean toward upscale merchandising.

Jensen's Finest Foods, Palm Springs, Calif., is likely to triple its program to 30 coffees in response to sustained customer interest in trying new and exciting roasts. "Specialty bulk, whole-bean coffee is a consistent mover. That's definitely where the [coffee] category is going," said Mike Zack, specialty buyer for the four-store independent.

Charles Pember, a buyer for Associated Grocers, Seattle, said gourmet coffee sales are one of the big reasons the cooperative wholesaler's specialty food sales "will be up 12% to 13% this year, which is excellent."

"Our sales of gourmet coffees have grown 5% in the last year," said Cindy Yost, specialty food buyer for West Point Markets, Akron, Ohio, another retailer known for upscale quality.

Shawnee, Okla.-based Pratt Foods beefed up its bulk specialty coffee varieties from 20 to 40 in the last year, and saw sales grow 25%, said a company source.

Retailers likened the potential to the brisk business that coffee shops are doing in many markets. If small shops can stay busy, then supermarkets, with high traffic and high volume, are sure to benefit from the same consumer trend by setting up similar programs, they said.

All this is good news for the suppliers of gourmet whole-bean coffees, who want to expand their supermarket business.

"People are looking for higher quality, alternative coffee and coffee beverages," explained Dennis Boyer, president and chief executive officer of Gourmet Coffees of America, based in Denver. "And, historically, it has not been available through the more traditional coffee companies, who have offered canned coffee in two or three sizes."

Last month, GCA purchased the Hillside Coffee operations from Chock Full o' Nuts. The acquisition now leaves three sizable national players -- GCA, Millstone Whole Bean Coffees and Nestle's Sarks -- in the gourmet coffee category, according to SCAA's Lingle. Add in a bevy of local roasters, and you have a burgeoning industry making serious headway onto supermarket shelves.

With price points about $6 a pound, the success of gourmet coffee might seem to fly in the face of today's tight economic times. But some sources say cost isn't really an issue with gourmet coffee and other specialty foods.

"Maybe you can't afford to go out to dinner, but you're going to buy yourself a specialty food item in the supermarket -- a good, quality product," said Pember of Associated Grocers. Krista Gladsjo, bulk foods specialist for Thrifty Food Stores, Burlington, Wash., said consumers are realizing that on a by-the-cup basis, gourmet coffees represent a value.

"I think more people are looking at the price and realizing that specialty coffee is an inexpensive treat, that is, a better-quality coffee," she said.

Kroger Co. is also hitching a wagon to the trend. Its store-brand gourmet "French roast" coffee is conspicuously labeled "The Affordable Luxury." The chain does its own roasting and merchandises the store brand adjacent to branded whole-bean products in a section that includes a grinder.

Katie Wolfram, a marketing manager for Kroger, said the coffees are strategically situated beside the gourmet brands for a favorable price comparison; the private label, at $2.09 for 12 ounces, was close to half the per-pound price of the gourmet branded line.

Fancy coffees were one of the first private-label products Kroger introduced, she added. The decaffeinated 100% Colombian product sports the "B.H. Kroger" label in script to give it further distinction.

West Point's gourmet coffees are run at $6.99, with several "Swiss water decafs" at $8.99, but buyer Yost said the price tag is no obstacle. "Customers are paying for the freshest quality. You can tell they're fresh by looking at the beans."

Ahhh, so it's the beans.

In his song, Drake penned, "I'm not keen for a bean, unless it is a cheery coffee bean."

Well, these days, consumers apparently are not keen for a bean unless it's an arabica bean. Industry sources explained that the arabica bean is the base used for true gourmet or specialty coffees, as opposed to the robusta bean used by commercial roasters.

Just add a touch of flavor to the arabica and you've got yourself a hot seller.

GCA's Boyer said some of his company's top moving flavors are hazelnut, French vanilla, Swiss almond mocha, and Irish cream.

"Driven principally by their success on the supermarket shelf, flavored coffees will continue to increase in total market share," said SCAA's Lingle about the category's future. "Combinations of vanilla and nut-like flavors will continue to be the top-sellers."

The flavors and total variety are the two factors Milt Lowe, the grocery buyer for Haggen, Bellingham, Wash., credits for the category's success in his stores.

With roughly 40 varieties to chose from, Lowe said, "Gourmet coffees continue to grow. People like the flavors, compared to the old flavors offered by the national branders."

But that does not mean commercial, nongourmet roasters are missing opportunities on the flavor front. Even gourmet roaster Boyer acknowledged that flavors play an important role in the success of some instant commercial lines, such as General Foods' International Coffees.

Some retailers, however, said that sales growth for commercial brands has been staggered by the specialty explosion of the last few years.

In Washington state, "sort of the coffee capital of the United States, if you will, there are a lot of small, independent roasters who deliver to the stores direct, which has a very dramatic effect on the commercial brands," said Associated Grocers' Pember. "Their sales are going downhill in this area." Zack of Jensen's concurred that specialty whole-bean coffees are growing at a faster rate than the commercial brands.

But there are others who feel that the success of gourmet specialties has lifted the entire category.

"I would say we're probably picking up total coffee business because of our gourmet coffees," said Tony Churchman, a grocery merchandiser for Malone & Hyde in Goodlettsville, Tenn. "Our commercial brand sales are still pretty strong."

Churchman said he suspects that people who were not regular coffee drinkers have come to like the brew after sampling pleasing flavors like gourmet chocolate, and that is adding incremental sales to the category.

Another buyer said she's seen coffee buck the typical summer slump this year, and credits the gourmet trend.

"This year, sales really weren't down," said Brenda Marshall, head buyer for Des Moines, Iowa-based Lomar Distributors, which is owned by Hy-Vee Food Stores of Chariton, Iowa, and which procures products for the chain.

"It was a very good summer for coffee as a whole, especially gourmet coffee sales. And we look for good things this fall," Marshall said.

The gourmet coffee activity has even encouraged sales within the related flavored creamers category, A.C. Nielsen Co. reported. According to Nielsen, the top-five flavored creamers climbed from a combined $478,000 in dollar volume in the period ended March 1992 to a remarkable $28.3 million 52 weeks later.

"Shoot me the pot . . . and I'll pour me a shot . . . a cup, a cup, a cup . . ."

In Washington state, virtually every retailer has an espresso bar, even convenience stores. Following the lead of operators in the Pacific Northwest, more chains are likely to get into coffee shop or espresso bar operations, industry sources expect.

Even the most modest gourmet whole-bean programs feature bulk beans and brass grinders in the coffee aisle, and are often attracting new category sales.

"The 1990s will witness the migration of the specialty coffee culture, first eastward, to the Northeastern regions of the country and then filling in the Midwest," said SCAA's Lingle.

Midwest chain Hy-Vee offers more than 20 varieties of gourmet coffees in line with the commercial brands. Marshall said, however, that sales are particularly strong at its Mission, Kan., store, where "there's an actual coffee house, equipped with a big cappuccino machine, where you can go in and sit down and have a cup of coffee."

Dominick's Finer Foods, Northlake, Ill., is among the chains that has built specialty coffee into a separate department with an espresso bar.

"We have a special section of international gourmet coffees, called Maggie's, in 35 of our stores," said Rich Simpson, director of public affairs for the chain. The section is near the deli department. Simpson declined to go into specifics about the hot service program, but he did say the espresso bar has been a success. The whole-bean coffees' retails range from $5.99 to $8.99 a pound.

Byerly's, Edina, Minn., also has an espresso bar operation, which features bulk coffees as well as the 12-ounce and pound bags, according to Bob Henning, who is now the company's frozen food manager, but previously procured grocery items.

The espresso operation is located four or five aisles away from the regular coffee. Operating the full-service section requires some juggling of the dozens of varieties offered, said Henning. Byerly's culls slow movers as new flavors and blends are introduced.

At West Point Market, a section of 30 gourmet coffee varieties is strategically placed near the meat department, said Yost.

"We have a full service meat department, where customers take numbers and then they are waited on one by one. They then choose which meat products they want," she explained.

"It takes time for them to pick out each pork chop or steak. So, while they wait for their number to be called, they have a chance to rummage through our coffees, look at the different flavors, and find out which coffee we're featuring. I have a rotating coffee feature every month, with a different flavor. I do sampling in the department," said Yost.

"I also have three special blends that are blended just for us. Those are available in ready-to-go, one-pound and half-pound bags, whole-bean bags."

Yost provides her customers with three different grinders; one for the regular coffee, one for the flavored coffee and one for decaffeinated.

West Point uses a local roaster, who roasts the coffee twice a week. "I only order what I need," said Yost. "I place an order Monday morning. And then they roast all afternoon and it comes to me fresh Tuesday morning. Then I do the same thing on Thursday and it's delivered fresh to me Friday for the weekend."

To ensure the freshest product, Yost installed containers that only hold 10 pounds. "I've taught my customers that they really only need to buy what they feel they're going to use. Because they come in on a constant basis, there's no need to stock up and have it sit around."

While some retailers said they had secondary locations for their gourmet coffees, most put the category in or near the coffee aisle for the best sales performance.

Specialty Coffee Sales Climbing

Dollar volume for specialty coffees consumed at home is projected to reach $3 billion by 1999, double what it was in 1989, according to the Specialty Coffee Association. Projections were made for all retail outlets.

Billions of Dollars

1969 $0.1

1979 $0.75

1989 $1.5

1999 $3.0

Tanking Up On Premium

The total U.S. coffee market is expected to top 11 million bags by 1999. While canned commercial coffee volume will decline, volume of the upper end product will climb. Supermarket figures are broken out below.

SUPERMARKET VOLUME FOR ROASTED COFFEE

(in thousands of 60-kilo bags of green coffee)

1989 1999

Canned Commercial 6,200 5,490

Canned Premium 450 575

Whole Bean Commercial 150 140

Whole Bean Specialty 750 1,200