KROGER IS BREWING UP ITS FIRST IN-STORE COFFEE BEANERY

ROSEANNE HARPER

WEST BLOOMFIELD TOWNSHIP, Mich. -- Kroger Co. is perking up its image with a national-brand, full-service coffee bar at a new store in this Detroit suburb.

The bar is being operated as a corporate store by The Coffee Beanery, Flushing, Mich., which expects to open similar operations inside five additional Kroger units in the Detroit area within the next year, officials there said.

The Coffee Beanery, a specialty coffee retailer that has made a name for itself in shopping malls across the country, is offering its full menu of specialty coffees and espresso-based drinks as well as 24 types of coffee beans by the pound at the Kroger location.

Its 24-foot service counter, with adjacent seating for 15, is situated early in the traffic pattern to the right of the main entrance at the 63,315-square-foot Kroger unit that opened here late last month. According to The Coffee Beanery, it is the first such national-branded service coffee bar in any Kroger store. It is also the bar operator's first venture with a supermarket chain.

Officials at Kroger's Livonia, Mich., division office and at the chain's corporate offices in Cincinnati declined to comment on the linkup with The Coffee Beanery. Officials at the coffee company, however, said their operation inside Kroger is off to a hot start.

"We're capturing 6% to 10% of volume at this point, and that's good," said Mark Jameson, vice president of operations for The Coffee Beanery, referring to the percent of total store traffic as measured by the number of transactions. "Six to eight percent would have made us happy."

Jameson said Kroger approached his company about opening in the Detroit market. "It's a good fit because we have a strong presence in the area and so do they," he added. "We have brand recognition, and people particularly seem to enjoy the service aspect at this location. In general, supermarkets are still pretty much self-service, and we do provide that extra service."

The favorite drink at the Kroger location is cafe mocha -- as it is at The Coffee Beanery's other stores across the U.S. -- a product made with espresso, chocolate syrup and steamed milk. The retail for it is $2.70 for a 12-ounce cup, which is the same retail for the company's other espresso-based drinks. Straight coffee blends and flavored coffees are $1.05 for the same-sized cup.

The Coffee Beanery has chosen the Kroger site as one of six locations to test a children's drink menu, Jameson said. Selections include "Hot Shot," a steamed milk with a flavor shot of choice. Others kid's drinks have a cocoa base or are made with decaf coffee and cream with various flavorings.

Sampling The Coffee Beanery's more exotic drinks -- such as Caribbean Ice Bergs and Cafe Carmel Chillers -- and its hot mocha drinks helped bring attention to the service bar on the weekend the Kroger store opened, Jameson said.

"We went around the store all day with 4-ounce sample cups on trays," Jameson said. "People especially loved those cold drinks."

The Coffee Beanery service counter also offers a full menu of its own desserts, cakes and pastries, displayed in a low profile case.

Although Kroger's in-store bakery is positioned immediately adjacent to The Coffee Beanery counter, there's no conflict in product sales between the two departments, Jameson said.

The Coffee Beanery dessert products are "consumables, to be eaten here," he explained. By contrast, most of the in-store bakery's products -- such as whole cakes and packs of muffins or doughnuts -- are destined for the shopping cart.

Jameson said that about half of The Coffee Beanery's sales volume so far at this first Kroger location is beans, and that's fine with the company.

"A key factor here is that this store is in a high-income area," he said.

Jameson added that it's especially critical in a partnership with a supermarket that the store has a customer base sophisticated enough to appreciate specialty coffee, because the price spread between it and supermarket coffee is big.

Kroger offers its own brand of bean coffee elsewhere in this store for about half the price of The Coffee Beanery's coffees, which start at $9.99 a pound.

The average ticket at The Coffee Beanery at Kroger is $4. "It's a higher ticket for us and it creates customer loyalty, drives them back for more," Jameson said. "By contrast, at shopping malls, only 20% of sales are beans. The rest is consumables."

The arrangement The Coffee Beanery has made with Kroger is a straight lease agreement, the executive added. "We agreed on a fair rent. We don't pay them a percentage of sales. Basically, we're just a tenant of Kroger. This is one of our corporate stores, not a franchised one."

For Kroger, the payoff is the attraction of an established brand and the addition of a service operation that offers customers convenience, Jameson said. He added that a service coffee bar complements the increasing emphasis Kroger has been putting on service in its stores.

"People here really appreciate that we'll take the time to explain the difference between a Papua New Ginuea bean and a Kenya bean," Jameson said. "They also tell us they like the convenience of being able to buy our product where they do their grocery shopping." He praised Kroger's cooperation in getting The Coffee Beanery off the ground in its new store. "They had had a free coffee service of their own, right inside the entrance, and they've allowed us to take that over," Jameson noted. "We offer free 4-ounce cups of our coffees of the day there. They've also allowed us to make announcements every hour over the PA system." A Coffee Beanery banner hangs just inside the store's main entrance.