It’s tough to brew change in the ready-to-drink coffee category. Fifteen years after PepsiCo partnered with Starbucks to bring the Seattle chain’s spin on cold coffee to grocery stores and convenience coolers, it still dominates the category – though that hasn’t stopped a small phalanx of other brands from trying to charge up Starbucks’ hill.
Coca-Cola raised eyebrows this year by reaching out to independent New York distributor Big Geyser to build Coke’s newest co-branded coffee venture, Illy Issimo, and a handful of smaller companies have introduced their own coffee products, but no one has come within of a bean’s width of ending Starbucks’ dominance.
According to Information Resources Inc., Starbucks sold nearly a quarter billion dollars worth of canned and bottled coffees in club, drug and convenience stores (excluding Wal-Mart) in the 52 weeks ending Feb. 22. By IRI’s count, that gives the Seattle coffee chain 93 percent of the RTD coffee category – although those numbers exclude Java Monster and Rockstar Roasted.
Even including those high-profile coffee/energy hybrids, Starbucks still owns five of the top seven coffee lines as tracked by IRI. Java Monster comes in a distant second, with less than 15 percent the sales of the all-mighty Frappucino, and Rockstar Roasted grinds its way into sixth place. Both crossover lines boast triple-digit growth rates, but they have a long way to go to catch the category leader.
And the growth of the audience they’re targeting has fallen off. IRI reported that the RTD coffee category, full of promise when SoBe veteran John Bello got behind Adina Natural Highs last year, shrunk by 12 percent. Starbucks’ Frappucino line slipped by nearly 6 percent. Doubleshot dropped by 11.9 percent and Bolthouse Farms and Cinnabon suffered 5.4 and 50 percent drops, respectively.
With sales on a slide, non-Starbucks coffee brands could find a tough time elbowing their way into the cooler. Dick Peters, co-owner of Peter’s Market in Napanochny, N.Y., said the only RTD coffee he bothers to carry is Starbucks. Dana Sump, beverage manager for the 1,400+ Casey’s General Stores chain, said he carries two coffee brands: Starbucks and Java Monster. Java Monster’s best-selling SKU ranks third behind two Frappucino flavors, he said, and all coffee offerings rank far behind energy drinks.
Sump called the category stable, but stable can be another way of saying stagnant. Just take a look at this issue’s “Brand News” section. In a quarter-billion-dollar-plus category, just eight brands wanted to brag about news. Additionally, Adina, full of ambition last year, opted not to participate or even return calls for comment about Natural Highs. The company still promotes the product on its Web site, and advertised it as recently as the February issue of Beverage Spectrum, but has since shifted the bulk of its focus to its new herbal selections.
In that unpromising atmosphere, Muud coffee says its gaining ground. Co-founder Sean Pierce said he’s gotten Muud into a number of individual 7-Elevens and AMPMs and achieved corporate authorization from Circle K in the Western U.S. Now, he said, he’s working on earning top-level approval from another convenience chain and building promotions tied to professional sports teams.
The secret to his success, he said, is offering a premium product at an affordable price – a strategy he compared to that of AriZona or Hansen’s. His 15 oz. Muud products retail for a suggested price of $1.99 each compared to Starbucks $2.59 price tag for the same volume.
Coke has taken a different tack. Illy Issimo, co-developed with Italian coffee brand Illy Café, leverages Illy’s premium reputation and retails at $2.49 for as little as 6.8 oz. The three SKU line offers Caffe, Cappuccino and Latte Macchiato flavors, and Vinay Kapoor, chief exective for Ilko (Coke and Illy’s joint venture) said he expects the brand to be big. Despite Coke’s marginal success with Coke Blak and its Carribou Coffee and Godiva lines, Ilko said it plans to reach 30 percent of the premium ready to drink coffee category market by 2012.
So, perhaps there is room for change in coffee. But you should probably keep Frappucino in your cooler – for the foreseeable future, at least. •