Talking Shop with… Tom Ferguson

The vice president of sales strategy and trade management for the specialty coffee business unit of Green Mountain Coffee Roasters shares his thoughts on what the fast- growing single-cup beverage segment means for the grocery channel.

Grocery Headquarters: What is driving growth in the coffee category?
Tom Ferguson: The interesting trend we are seeing is that while the coffee category is growing, much of this growth is being driven by single-cup sales. Total U.S. grocery coffee category sales are up 8.4% for the latest 12 weeks ending July 8, according to SymphonyIRI Group data. Single-cup coffee grew 93.5% over the same period last year, representing 6.4% of coffee category sales. IRI shows that single cup is not only one of the fastest growing sub-categories, but also contributes some of the largest absolute sales gains across the store. This has not surprised us, as we hear from consumers that the Keurig K-Cup brewing system satisfies their needs for quality, variety and convenience.

Why is the single-cup segment valuable to grocers?
The single-cup segment is attractive to grocery retailers for many reasons. Research from a Kantar Retail ShopperGenetics study for the 52 weeks ending October 2011 shows that K-Cup pack buyers spend 63% more annually than the average grocery shopper. This is due to their larger basket size and higher trip frequency. In addition, K-Cup packs deliver more than four times the profit per cup than bagged coffee.

What can supermarkets do to maximize single-cup sales opportunities?
It all comes down to assortment and merchandising. A key benefit of the Keurig system is that it allows grocers to satisfy shoppers who are looking to try a wide array of quality coffees, teas and other beverages. This past year, we have launched many new brands in grocery, including Swiss Miss Hot Cocoa, Green Mountain Naturals Hot Apple Cider, Barista Prima Coffeehouse, our new super-premium coffee collection, and Eight O’Clock Coffee. In addition, we have introduced many new, exciting varieties within our existing brands, including Green Mountain Coffee Iced Hazelnut Coffee. Several other big name coffee brands have also launched in K-Cup packs, which has helped bring more buyers into the system. Having a broad assortment is definitely important as 70% of K-Cup pack buyers stock more than three different brands in their homes, according to a Kantar Retail Online Study conducted in March 2011.

With these new varieties hitting shelves, it is important for grocers to group K-Cup packs together on shelf to make it as easy as possible for single-cup shoppers to find their favorites. By grouping Keurig beverages in a set organized by beverage segment and brand according to how they shop, grocers present the opportunity for shoppers to not only purchase their favorite coffee, but to also discover new beverages to try. It is also important to provide secondary display placement, particularly for seasonal beverages, to highlight opportunities for impulse sales.

What trends are you seeing within the single cup segment or coffee category overall?
We expect interest in single-cup beverages outside of coffee will grow as consumers discover new ways to use their Keurig brewer. This fall, we will offer two additional SKUs in our Café Escapes line of indulgent, dairy-based beverages: Café Caramel and Café Vanilla. We will also continue to offer Green Mountain Naturals Hot Apple Cider. In addition, we offer a lineup of Brew Over Ice K-Cup packs, which are specially crafted to create refreshing iced beverages when brewed directly over ice with any Keurig single-cup brewer. Brew Over Ice K-Cup packs help generate incremental purchases for grocery retailers, by offering Keurig users yet another way to enjoy their brewer.

Another trend we are seeing is the continued growth of certifications like fair trade as consumers become more sophisticated about the origins of the foods they purchase. Fair trade provides a fair price to coffee farmers for their beans, resulting in high-quality coffee and a higher quality of life in coffee-farming communities.  Green Mountain Coffee offers the largest selection of Fair Trade Certified coffees in the country and we continue to expand our fair trade varieties in supermarkets.

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