The vice president of sales for the specialty coffee business at Green Mountain Coffee Roasters shares his thoughts on what the fast growing single-cup beverage segment means for the grocery channel.
Grocery Headquarters: How is the single-cup coffee segment performing in grocery stores?
Jim Travis: Extremely well. We believe single-cup brewing is driving the growth of the specialty coffee category at grocery—and the numbers show it. According to data from Chicago-based SymphonyIRI Group, the single-cup coffee segment is the second fastest growing center store category, with total U.S. supermarket sales up 130% for the 52 weeks ended February 2011. SymphonyIRI Group data shows that our K-Cup portion packs for the Keurig Single-Cup Brewing System alone have fueled 80% of total coffee category growth, which means consumers are searching the aisles for the quality, variety and convenience that the Keurig system brings to their daily coffee—and now beverage—routines.
How important do you think single-cup shoppers are to grocers today?
All you need to do is look at shoppers’ spending habits to find the answer. Research from a recent Kantar Retail Shopper Genetics study for the 52 weeks ended February 2011 shows that K-Cup portion pack buyers spend 57% more annually at grocery stores than the average shopper. This supports our belief that portion packs may generate incremental purchases for grocery retailers, because the Keurig System and K-Cup portion packs meet the needs of more consumers in the household. In the past, when families consumed coffee in their homes, they would have one or two bags in the cupboard. We designed the 12-count K-Cup portion packs specifically for supermarkets to appeal to shoppers who want a wide variety of coffee, tea and other beverages to appeal to every family member.
How can grocery retailers best cater to the single-cup shopper?
It all comes down to variety and grouping. A key benefit of the Keurig System is that it allows grocers to satisfy shoppers who are looking to try a wide selection of quality coffee, tea and other beverages. This fall, we have a number of new varieties for the grocery aisle, including Swiss Miss Hot Cocoa, Green Mountain Naturals Hot Apple Cider and Barista Prima Coffeehouse, our new super-premium coffee collection. Several other big name coffee brands will also be launching in K-Cup portion packs, which will help bring more buyers into the system. Portion packs don’t follow the typical “80/20” rule in grocery. With portion packs it takes 60% of SKUs to reach 90% of buyers, according to the Kantar study referenced above.
With these new varieties hitting the shelves, it is important for grocers to group K-Cup portion packs together on shelf to make it as easy as possible for single-cup shoppers to find the portion packs for their brewer. By grouping Keurig brewed beverages in a set, grocers present the opportunity for shoppers to not only purchase their favorite coffee, but to also discover new beverages to try.
What is the most unique thing about single-cup versus other coffee segments?
Due to the high quality, convenience and variety that the Keurig system provides for consumers, almost a third of K-Cup portion pack sales are from shoppers who buy five or more flavors or roast varieties annually, as shown by our Kantar research. This is disproportionately high for the segment, with these variety-seeking buyers spending nearly 3.5 times more on the coffee category each year.
K-Cup portion packs also have a high expandable consumption rate. The Kantar research shows that while coffee category expandability is at 35%, K-Cup portion pack expandability is even higher at 42%.
This reinforces the need to offer an assortment of different K-Cup portion packs to accommodate the single-cup shopper’s needs. With a wide variety of portion pack beverages grouped together on grocers’ shelves, shoppers can easily stock their pantry, enjoy more portion pack beverages at home and return to the store more frequently to try more. It’s an exceptional opportunity for retailers to capitalize on the single-cup trend.