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Everything Old Is New Again:
Especially When it’s Private Label

By Suzanne Brown

I got a kick and an out-loud chuckle when reading an online article about a new line of wines with names like Jailhouse Red Merlot, A King Cabernet Sauvignon and Blue Suede Chardonnay, in honor of Elvis Presley. The wines are produced by Signature Wines under their new Graceland Cellars line. Elvis the pelvis isn’t the only cool wine on the market. I’ve seen Red Truck wine featured in Whole Foods and Old Fart wine on display with cheese at Ali-Oli’s restaurant and specialty food store here in Atlanta.

No matter how hard we try to bury Elvis, his persona continues to live. I’m surprised Kohler hasn’t introduced a line of Elvis toilets (you know the King did die on one). There is no end to what private label products can produce. Movie and music stars were the names on one pot brick packages of Melitta coffee in the late 90’s. I remember some of the faded, but classics like Bobby Rydel, and Jimmy Nelson, the ventriloquist, who, with his dog puppet Farfel, became famous for their advertisements for Nestlé’s Quik.

Over the years, I can’t think of a niche in the coffee or tea industry that has not utilized private label. When we think of private label, however, the first channel of distribution that comes to mind is supermarkets. Certainly, supermarkets have been and continue to be a channel leader. However, private label products continue to grow, as do channels of distribution opportunities. According to the Private Label Manufacturers Association (PLMA), store brands now account for one of every five items sold every day in the U.S, supermarkets, drug chains and mass merchandisers. They represent more than $50 billion of current business at retail and are achieving new levels of growth every year.

Store brands are bargains to consumers too. Consumers who bought their favorite grocery products rather than the national brand, enjoyed an estimated $15.8 billion in annual savings last year, based on industry sales data. The difference is the so-called marketing tax, which includes advertising and promotional material. Store brands help retailers increase their business by building store loyalty and in differentiating their products from the well known brand available anywhere.

Success for purchasers of private label products is dependent on more than developing a product and putting it on the shelf. Large, commercial coffee and tea companies like Sara Lee Corporation and Reily Foods Company have built solid reputations in producing private label brands as well as their own brands. In his business, Jeff Vojta, Stockton Graham Company, a small roaster/retailer in Raleigh, North Carolina, is experiencing a growing interest from customers wanting to offer a complete branded set of products to differentiate themselves from their competitors in the market place. This includes a preparation and serving area, cups, condiments, serving utensils and related accessories, he related.

For coffee and tea companies that offer private label programs, equipment is also part of the package. In Stockton Graham’s program, the package includes “ground or whole bean coffees, individual tea servings and assortments as well as fresh brewed iced beverages,” said Vojta. “A variety of brewing and preparation equipment along with serving accessories is also included,” he added.

Traditional roast/ground coffee and teabags aren’t the only ingredients to the private label mix. Concentrates have helped develop new beverages and provided solutions to the hectic foodservice industry. Douwe Egberts, one of the first successes in the Quick Serve Restaurant (QSR) niche as a branded coffee made from concentrate, now has plenty of competition from not only the large commercial companies, but smaller manufacturers like XCafe, Beverage House, Liquid Coffee, Inc., and Amelia Bay. Bag-in-box technology has proven to be a convenient, cost efficient system for QSR because of its quality delivery, ease of operation and simple maintenance.

Commenting on the convenience of liquid concentrates, John Crandall, Amelia Bay in Alpharetta, Georgia, sees even McDonald’s has converted to liquid coffee concentrate. He said that Burger King has liquid concentrate programs in 6,500 locations and there is more growth in healthcare, nursing homes and banquet feeding hotels. Now the demand includes liquid concentrates that are “low carb.” Amelia Bay, which manufactures concentrates made from coffee, tea and citrus, is supplying private label for several European countries and Central American countries for liquid coffee in bulk and bag-n-box.

A complete beverage program from Amelia Bay consists of concentrates, beverage flavors, tea and coffee. Technical support is provided for the development of private label beverages and technical data for new high-intensity sweeteners, which is another driver for the entire beverage industry.

“Liquid Coffee,” a manufacturer based in St. Augustine, Florida, has been supplying concentrates of juice and coffee, using the bag-in-box technology for over 10 years. Stictly private label, Liquid Coffee’s Ray Duke, a career veteran of concentrate manufacturing industry, foresees a continuing increase in demand for shelf stable bag-in-bag technology for foodservice.

Some of Liquid Coffee’s customers include Juice Tyme of Chicago, Unique Beverages, Farmers Brothers Coffee and Stewarts Coffee, to name a few. Duke has experienced through the years an evolvement of production technology and technique that meets the needs of customers based on taste, shelf life and roast preference. “Concentrates are good for the entire industry,” said Duke. “We purchase roasted beans, which are blended to our specifications, then roast and package for foodservice customers,” he added. “We don’t use any preservatives and our concentrate ratios are on the high end; from 50 parts to 1 part to 115 parts to 1 part. Liquid Coffee is experimenting with several projects for retailers as well. Duke speculates you will be seeing more RTD products with supermarket brand names and more in coffeehouse chains, formulated by roasters with the name of the coffee chain on the label.”

Restaurants seem to be a growing opportunity for private label manufacturers. Signature coffees and teas can make a point of difference when endorsed or have the chef’s name attached, for instance, Wolfgang Puck’s line of RTD coffees. If for no other reason, the Wolfgang Puck name symbolizes “gourmet” and “quality” and if served only in his restaurants, would be profitable. For roast/ground programs, the name of the restaurant or chef creates additional sales not just by the drink, but as take-home souvenirs, sold within the restaurant. Small plunge pots offered with the private label program help create drama and ritual at the table and can be sold along with the coffee for added restaurant branding… and sales revenue.

Because quality coffee is in demand, casual dining and QSR restaurants are revamping their coffee and tea programs. Whether a restaurant chooses a branded program or private label depends on its corporate philosophy. The hospitality industry has found increased revenue in coffee and tea programs as well. Royal Cup Coffee Company, based in Birmingham, Alabama, is a private label coffee company and offers programs to offices, retailers, foodservice and hospitality industries.

More and more restaurants have discovered that quality coffee and tea programs can build revenue and provide opportunities for building those slow day-parts with new menu items. While Dunkin’ Donuts has been tremendously successful with its new espresso beverage program, that doesn’t mean that every QSR should be installing the same type of equipment and menu selection. Revamping or creating a coffee/tea/beverage program is entirely dependent on the brand and philosophy of the restaurant. In his experience, Crandall cautions quick serve and any restaurant to think through its objective. “Americans do not seek espresso coffee consistently enough to make an espresso program valid,” said Crandall. “For a positive return on an investment like that of Dunkin Donuts, there must be a substantially higher demand, which has been created through advertising and consumer acceptance of quality espresso coffee.” He suggests that if the equipment doesn’t pay for itself, restaurants should focus on offering a quality cup of coffee or tea.

Vojta offers a different perspective. He suggests restaurants offer espresso beverage programs because those drinks are priced on a per drink basis (no free refills) and are two to three times more expensive than regular coffee. “Not only can they increase revenues, they typically have a greater gross margin contribution,” he added.

One would have to include the extra cost for equipment and staff training in those calculations. Vojta continues to add, however, that restaurants must have a customer base that wants the espresso based beverages and is willing to pay more for them. “Establishments with heavy morning traffic are automatically a better fit than one who opens after 10 AM,” noted Vojta. Plus, there must be a variety of offerings including flavored syrups, and a trained staff who knows how to prepare the range of espresso beverages.

If the new introductions in equipment are any clue to assisting companies in creating either branded or private label programs, one would assume the foodservice segment is open to just about any customized program. During the SCAA Conference in Atlanta, a tour of the exhibit hall and conversations with companies like Bunn, Fetco, Curtis, Rancilio, Boyd and Gemini indicate the latest brewers, machinery and turn-key equipment programs have been designed to meet any foodservice budget.

The point in presenting options is to validate what you already know: to develop a program, whether branded, co-branded or private label, that meets the needs of your customers, whether it’s fine dining, or the local diner. It’s like designing your own potato head, adding a whimsical hat to the facial parts that come with the set, or just using the parts that fit best with its shape.

One more thing. Don’t forget to bring back the old stuff. A press release from a well known branded coffee company announced the introduction of its first flavored coffee: blueberry cream. Haven’t I seen that before?

Suzanne J. Brown is owner/principal of Brown Marketing Communications LLC, based in Atlanta, Georgia. She is researching and writing Coffee In The U.S., in collaboration with the Beverage Marketing Corporation. The publication is expected to be available late fall. She can be reached at info@browncommunications.us; Website: www.browncommunications.us.


Tea & Coffee - August/September, 2004
Modern Process Equipment

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