Consumer expectations have elevated coffee

Consumers who were previously addicted to coffee mainly for its caffeine fix are now expecting more from their java. These days coffee is more than just a pick-me-up. Some consumers seek single-origin beans, while others are treating themselves to indulgence, and still more are searching for coffees that promise an added function.

“It’s changing — not only at retail — but consumers are coming to expect a higher coffee experience wherever they go,” says David Morris, senior analyst for beverages at Mintel International, Chicago.

From indulgent to functional, foodservice has been one area that continues to drive innovation in the coffee category.

“Quick-service restaurants and coffeehouses are finding that new coffees are a way to be able to increase margins in the morning,” Morris says.

Quick-serve restaurant chain McDonald’s has been improving its coffee offerings since the 2006 launch of premium coffee and this spring’s iced coffee program. The Oak Brook, Ill.-based chain attracted attention once again when it announced this fall’s test of McCafe Specialty Coffees in the St. Louis area. Through January, Missouri consumers can sample specialty drinks free on Mondays. The special brews include Vanilla Lattes, Café Mocha and Caramel Cappuccinos, which McDonald’s hopes to roll out nationally in 2008.

This fall, convenience store chain 7-Eleven, Dallas, went for functional appeal with its Fusion Defense coffee. The functional brew features echinacea, ginseng and astragalus to help defend consumers during the cold and flu season, the company says. Fusion Defense joins Fusion Energy and more varieties as the chain expands the functional coffee line.

As some chains expand their restaurant offerings, Dunkin’ Donuts, Canton, Mass., expanded its coffee brand into retail. The coffee and baked goods chain partnered with Cincinnati’s Procter & Gamble for the September introduction of Dunkin’ Donuts coffees at grocery stores. The coffees are sold in Original Blend, French Vanilla, Dunkin’ Decaf, Hazelnut and Cinnamon Spice ground varieties as well as a whole bean version of Original Blend.

Coca-Cola, Atlanta, partnered with Minneapolis-based coffeehouse chain Caribou Coffee for the launch of branded RTD coffees, which debuted this summer. Mintel’s Morris says it’s part of a larger retail trend regarding cross-branding of recognized coffee brands at retail.

For Starbucks fans, availability of its branded products has become nearly as ubiquitous as its coffeehouse locations. Seattle-based Starbucks’ RTD coffees accounted for nearly 90 percent of retail sales in food, drug and mass merchandise outlets in 2006, according to data from Mintel. This holiday season a special Dark Chocolate Peppermint Mocha Frappuccino hit shelves and the company will add Dark Chocolate Mocha in the spring.

In October, the company made available Starbucks Limited Reserve line of limited-edition coffees from specific coffee-growing regions. The initial blends come from Colombia, central Africa and Papua New Guinea. Limited Reserve is part of a larger trend in coffee toward single-origin blends.

Coffee extract supplier X-Café, based in Princeton, Mass., provides coffee extracts to private label beverage manufacturers and foodservice accounts and has long recognized the importance of single-origin coffee.

“I think the next big thing in coffee extracts will be single-origin taste profiles,” says Cathy Kalenian, co-founder and chief financial officer of X-Café. “It was in our initial foundation as a company and specialty coffee manufacturers have realized that single origins have unique flavors.”

The grocery channel is where 80 percent of coffee purchases are made, according to Jerry Densk, director of marketing for mainstream coffee at Kraft, Northfield, Ill. Yet, the major brands, including Kraft’s Maxwell House and Procter & Gamble’s Folgers have faced a challenging period. The traditional brands are caught between a younger demographic that wants more premium varieties and a loyal older demographic, which is not as interested in premium coffee, different flavors or higher price points, Morris says.

To increase appeal, Folgers released Simply Smooth stomach-friendly coffee and Gourmet Selections flavored premium line in 2006. Last month, Maxwell House re-launched its coffee, now made with 100 percent Arabica beans.

“When we talked to consumers, they wanted a fuller cup of coffee with less bitter taste,” Densk says. “We think it’s the best cup of coffee we’ve ever made and we’re delivering on what they have asked.”

Additionally, the coffee and RTD coffee category continues to innovate to attract more consumers. One new trend in the category is hybrid products, such as Java Monster from Hansen Natural Corp., Corona, Calif., which is a crossover between RTD coffee and an energy drink.

“What’s fascinating are the hybrid-oriented products, which is one of the more ominous trends [for traditional coffee companies],” Morris says. “The trend offers potential for energy drinks, which tend to skew younger and more toward Hispanics and African Americans, to cut into the ability to sell an energy boost that used to be available via coffee. These products also can take the consumer out of the coffee realm and into energy drinks over time.”

Introduced in June, Java Monster is available in three coffee flavors — Big Black, Loca Moca and Mean Bean. The 16-ounce dairy-based drinks blend coffee with Monster’s energy ingredient blend. (To find out more about Java Monster see page 26)