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What's happening in flavored coffees.

What's Happening at Retail?

Barney's * Orlando, FL

Barney's Coffee has retail stores in 16 states and the District of Columbia and sells whole bean coffee and coffee by the cup. The company started in the early 1980's and all stores did a big business in flavored coffee from day one. According to Phil Jones, flavor has always been an important part of the business as has decaffeinated and flavored decaffeinated coffees. Flavored coffees are now one-third of the total coffee business for Barney's. The company predicted it could someday be 50% of the business.

Most of the flavors are based on flavor groups such as chocolate, cinnamon, fruits, liquors and nuts. Vanilla is mixed in to give a non-sugary sweetness. Flavors are then mixed together to create exotic blends.

Barney's is very careful about sanitation and cleanliness of its equipment in order to prevent contamination. Flavored coffees are segregated from other coffees. Two separate grinders are used, one for flavors and one for all other coffees.

Stores carry 30 to 40 flavored blends. The company encourages employees to come up with new flavor blends, the wilder the better. "Coffee Cake" was a flavor blended by a staff member that the company registered and went on to become one of the most popular coffee flavors.

The Coffee Beanery, Ltd. * Flushing Michigan

"We were one of the pioneers in flavored coffees," said Joanne Shaw, president of The Coffee Beanery, a franchise of specialty coffee stores headquartered in Flushing, Michigan with 67 stores from New York City to Scottsdale, Arizona. The company has been in business since 1967 and been retailing flavored coffees since 1977.

According to Shaw, flavored coffees were not well thought of initially. "We wanted to interest people who were non-coffee drinkers. Flavored coffees were the route we took. It worked very well for us. People who say they don't like coffee do come to like flavored coffees. Flavored coffee played a major role in recent growth in the consumption of specialty coffees," she said.

The Coffee Beanery flavors all its own coffee. It adds ingredients such as nuts and coconut to its coffees in the flavor process. The company feels that dark roast coffees are becoming more popular and is adding a line of dark roast flavored coffees. The four flavors include Amaretto Vienna, French, French Vanilla Nut Creme and Swiss Chocolate Almond Vienna. The company has created gift sets with all four flavored coffees.

Shaw sees flavored coffees leveling off with more flavored dark roasted coffee and ice coffee. The company has an office coffee service area with 1,600 accounts. Shaw sees strong growth in that area and will be expanding the OCS division.

The company is expanding its plant to five times its current roasting capacity and adding 30,000 square feet of space.

Some Say NO to Flavored Coffees

Not everyone is so happy about the rapid rise of flavored coffees. There are some who think otherwise such as Howard Schultz, president and ceo of Starbucks Coffee Co. Starbucks has 125 company-owned stores in five regions throughout the U.S. and Canada.

According to Schultz, Starbucks takes a purist view toward buying and roasting coffee. "We have always viewed flavored coffee as something that would not be consistent with the expectations of our customers," Schultz said.

"We don't do anything that is trend-oriented, and we have remained the same for over 20 years. We try to do what we do the best. For us to sell flavored coffee would be a major compromise. In most cases, the flavors mask an inferior coffee. It is true that flavored coffee may have introduced some people to coffee. Another way is through education. The general public does not know a great deal about specialty coffee. We are concerned that with flavored coffee they would have an adulterated experience," he said.

At Starbucks, the coffee education program starts with its own employees. Employees spend 25 hours in a classroom learning about coffee. The employee can then advise the consumer about gourmet coffee. In addition, there are ongoing store tastings and extensive point of sale and literature for the consumer.

Peet's Coffee & Tea * San Francisco, CA

In San Francisco, Peet's Coffee & Tea, Inc. is not happy about flavored coffees. "I think it is the worst thing that has happened to coffee," said Jim Reynolds, Peet's General Manager and Roastmaster. "It's a wonderful beverage; the flavor can't be synthesized because it's such a complex combination of flavors," he said.

Reynolds feels that flavored coffees do not do the industry any good and will not successfully introduce young people to coffee. He feels that young people will respond to the flavor only and that the coffee will be of a poor quality. The goal of the company is to maintain the purity and high standards of Alfred Peet the original owner.

The Return of the Coffeehouse

With the new health consciousness of the 90's and educational programs against drinking and driving, people are drinking fewer alcoholic beverages. And, so they are looking for something to replace a cocktail and a place to go to drink it. The result is the return of the popular coffee houses and espresso bars of the 60's. Only now they are stocked with a broad selection of flavored as well as regular and espresso coffees.

Arabica Coffee & Tea * Cleveland, OH

There are currently five Arabica Coffee & Tea coffeehouses in the greater Cleveland area where people of all ages come to sit, relax and drink coffee as they do in Europe and in the U.S. in the 60's. The atmosphere is relaxed with folk music and the dress is casual. The menu features homemade ice cream and desserts and coffee and tea beverages.

Arabica has been serving a range of flavored coffees for five years. The coffee houses have been around for 15 years, six years under the current ownership. Response to the new flavored beverages was slow at first but now is almost equal to straight sales at some locations. They are consumed by people of all ages.

Coffeehouses carry as many as 15 different flavors. Some of the most popular one are Frangelica (Hazelnut Liqueur), Irish Cream and Swiss Mocha Almond, Chocolate Raspberry, Cookies & Cream, Kiwi Strawberry, Mint Chocolate Chip, Cafe Mocha. Flavors are rotated throughout the day, and a customer can taste three different flavors. Arabica takes it a step further and brews something called a "Toddy", a cold brewed regular or flavored coffee steeped for 24 hours in cold water then used to make ice coffee.

According to Arabica's President, David Reich, people who won't drink straight coffee will drink flavored coffees. "They have strong, fragrant aromas and no calories -- they are like having a dessert in a cup. Since the drinking age has been changed to 21, coffee is an alternative to a drink. It's like going to a bar and ordering one of a 100 different drinks. You can order one of many flavored coffees, even one with liqueur flavors, and have the same sophisticated experience," he said.

The New Iced Coffees

Ice coffee is the newest flavored-type coffee product on the market. The Wall Street Journal has called the ready-to-drink coffee and tea market a "potentially hot new growth area for beverages."

With the consistent dominance of soft drinks in the beverage market, ice coffee is a way to compete for that segment of the market. It is another approach to capturing the younger beverage consumer. Both the coffee and the soft drink industries are watching the developments of this market very carefully.

Cold iced flavored coffees have been in the marketplace for some time in Japan and South Korea although they are new in this country. Maxwell House has three CAPPIO iced cappuccino products in test market in Phoenix and Tucson. CAPPIO comes in three flavors--Coffee, Mocha and Cinnamon--and is available in 4-packs of 8 oz. single-serve amber bottles and 7.75 oz. trimline cans.

The products retail at about $2.79 and are shelf stable. They are made of real coffee, and real milk and a sweetner. They are about 125 calories per 8 oz. serving with about the same caffeine as a cup of coffee. The company is pleased with the response to CAPPIO but says it is too early to predict how the product will ultimately fare in the marketplace.

As of March 91, a major worldwide joint venture of Coca-Cola and Nestle S.A. to market coffee, tea and chocolate beverages was established in its Tampa Headquarters. The Coca-Cola Nestle Refreshments Co. will manufacture, market and distribute ready-to-serve coffee, tea and chocolate beverage products. Products will be marketed world-wide except for Japan.

As of October 1, CCNR launched its first products, Nescafe Regular and Nescafe Rich, into the booming canned coffee market in South Korea which grew 71% over 1990 in the first six months of this year. CCNR is developing plans for market entry in other parts of Asia, the United States and Europe.

For the first time, consumers will have the choice of ready-to-drink hot or chilled coffee. Coca-Cola vending machines have the ability to dispense both cold and hot products while special "warmers" have been developed for displaying the product in retail outlets.

According to CCNR Representative, Larry Teague, "We see the market for canned coffee developing very rapidly in Korea. Korean consumers have already shown they like the concept. Now they can buy it ready-to-drink, hot or cold. The availability of the product hot or cold from vending machines is in line with the hectic pace of life of many Koreans."

Chock Full O'Nuts is very positive about its new coffee beverage, Chock O'ccino. It is a flavored cappuccino drink, available in Mocha, Cinnamon, and coffee flavors, that can be consumed hot or cold. Chock O'ccino is made from coffee, milk, sugar and other natural flavors. It comes in twist-off bottles packed in a four-pack carrier.

"With Chock O'ccino, we are targeting a younger consumer and tapping into a booming marketplace," said Bob Mitchell, marketing director of Chock. "We are going after the bottled water and juice sparkler drinkers. That is the competitive arena," he continued. Mitchel said with alcohol consumption down and reduced interest in soft drinks, the consumer is looking for something a little different in a beverage."

The company rolled out in the Metro New York area in May. Roll-outs in other Northeastern markets are currently under consideration. The marketing effort has included such highly promotional programs as radio advertising, special event sponsorship, coupon hand-outs, in-pack cross-promotion with other Chock Full O'Nuts products, and Chock O'ccino vending carts in high traffic locations for product sales and promotion.

In addition to the consumer market, Choc O'ccino is available through restaurant, hotel, school and OCS food and beverage service outlets. According to Mitchell, the product has received very positive responses in all areas, and is meeting its sales goal projections.

"Iced cappuccino is predicted to be a one billion dollar business in the U.S. by the end of the decade," Mitchell said. "Consumers may be drinking less coffee, but they are looking for a better quality coffee and greater variety in coffee drinks. The idea of having both hot and iced coffee as options, is very appealing to consumers"

Flavored Coffees in Filter Pouches

Another innovative growth area for flavored coffees is in the specialty pouched segment of the market primarily in filter pouches, a convenient and easy way to brew coffee.

"The market is wide open to a variety of pouch products" according to Peter Gould, president of Aldine Technologies Incorporated, specialists in the development of filter packaged products of coffee and tea for over half a century. "Consumers are working toward having a cup of flavored coffee after a meal as they might have a cup of Bigelow's Constant Comment or other flavored teas," he said.

Some important new product areas which will offer extensive market development in the specialty coffee market are single service and small brew pouches offering four to six cup capacities which can be made in an automatic drip coffee maker like Mr. Coffee.

"These pouched products offer the consumer the convenience they are used to along with the taste innovation and flavor they have come to expect in flavored coffee products," Gould said.

Through innovative new technology, these products such as Aldine's Super 5000 is making pouch packaging of flavored coffee a viable product choice. This high speed packaging unit takes ground coffee, puts it in a pouch, places it in a gas flushed overwrap and then packages it in cartons at speeds of 200 to 400 times current packaging methods.

"This new technology generates a product innovation that can be produced at significant cost reductions making pouch products possible at a cost just over the cost of ground roast pricing," said Gould.

Liz Fader writes for various industry publications on the packaging industry.
COPYRIGHT 1992 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Retailer, Iced Profile - Part III; coffee houses now offering more flavored and iced coffees
Author:Fader, Liz
Publication:Tea & Coffee Trade Journal
Date:Jan 1, 1992
Previous Article:Oz and the speciality coffee adventure.
Next Article:Flavors for coffee: what's hot for 92.

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