WAL-MART BRINGS IN TOSTINO'S TO RUN IN-STORE COFFEE CAFES

JENNIFER QUAIL

BENTONVILLE, Ark. -- Responding to consumers' increased interest in the rapidly expanding world of specialty coffee, Wal-Mart Stores, based here, has begun testing in-store cafes featuring a variety of bean options.

Wal-Mart has chosen to lease space to Tostino's Coffee Roasters, based in Tucson, rather than develop the cafe in-house.

"We began our relationship with Wal-Mart in their Mexican division in 1996," said Rafael Guerero, president and chief executive officer of Tostino's. "We then approached Wal-Mart about bringing the cafe venue to their U.S. locations."

He added that the company had been researching a move into the retail sector, but no plans were set until Wal-Mart presented the opportunity.

"The offer [with the Mexican division] was made on a Friday and they needed an answer by Monday," said Guerero. "They wanted everything up and running in five weeks' time. We were the only retailer [in the new food court] who was fully operational on schedule."

The opening of three cafes at Wal-Mart locations in Indiana takes Tostino's out of the food-court atmosphere of the Mexican locations -- which it continues to operate and expand -- and places it in a food-service venue all its own.

Tostino's Cafes, as the Wal-Mart stations have been dubbed, are positioned in front of the store registers and are the only beverage purveyors on the premises. They are so located to accommodate customers on their way in and on their way out, and are easily accessible shoppers looking to take a break.

"Our mission is to enhance the experience of the Wal-Mart shopper," said Tostino's chairman, Jerry Sonenblick. "We do this by providing a pleasant, relaxed atmosphere, complete with natural, color-coordinated surroundings and soothing music. The sophisticated setting helps identify the quality of coffee we supply."

The interior of the cafe was designed with a plantation theme in mind. The floors are stained cement to provide an earthy feel and the walls and cabinetry have been done in greens and earthy tones. Soft jazz creates a peaceful mood.

"We have had Wal-Mart customers remark on how much they appreciate our oasis," said Sonenblick. "They consider it an adjunct to their shopping experience."

While soaking in the relaxing atmosphere, customers can sample a variety of coffee specialties, from espresso and cafe latte to such signature items as a mocha frappe and fruit smoothies.

The smoothies, which are prepared with or without frozen yogurt, have become very popular, according to Guerero, as has the mocha frappe, a frosty blended coffee drink.

The cafes carry pastries that customers are allowed to bring into the store.

Guerero said the cafes do have seating, but most of their business is to-go. To accommodate takeout customers, Tostino's has created a thermal mug that can be hooked onto Wal-Mart's shopping carts.

Shoppers also may purchase whole beans and ground coffee to take home with them. Guerero said the cafes' coffees are not preground; employees grind them on request.

Contract restrictions prevent Tostino's from revealing any financial information about sales or leasing agreements, but Guerero did say that the firm was doing better than expected and was very happy with sales so far.

Sonenblick said Tostino's leases the cafe space from Wal-Mart. All staffing and payroll is handled by the cafes' controller unit, headed by Rafael Guerero's brother, Arturo Guerero.

Twenty more cafes are planned in Wal-Mart supercenters by year-end, and more in the future. The growth will move Cafe Tostino beyond the Indiana market.

"Our retail focus right now is completely on Wal-Mart and expanding within their supercenters," Sonenblick said. "If the opportunity arose to team with another retailer, we would discuss the situation with Wal-Mart before making any commitments."

"The connection with Wal Mart has just been terrific," added Guerero. "We're looking forward to growing with them."