NEW YORK — Competition in the retail coffee segment is heating up. JAB’s acquisition of Keurig Green Mountain, Nestle’s partnership with Starbucks to sell its retail products globally, and the Coca-Cola Co.’s pending acquisition of Costa shows the competitive dynamics are not abating and, in fact, accelerating. In the midst of such aggressive moves, the J.M. Smucker Co. is aligning its retail coffee portfolio with how consumers prefer to drink their coffee.
“Coffee is a large and growing category, $10-plus billion in measured retail sales, and has grown on average of 3% annually over the last four years,” said Joseph Stanziano, general manager of Coffee at Smucker, Oct. 9 during the company’s annual investor day. “That growth has led to increased competitive dynamics: new coffee competitors, increasing new product launches and a proliferation of brand messages to coffee consumers.”
Coffee sales make up 32% of Smucker’s sales, trailing only pet food at 38% of sales, and Mr. Stanziano said the company has a 26% share of the U.S. retail coffee category with sales of approximately $2.4 billion. The primary brands in its portfolio include Folgers, 1850, Dunkin’ and Bustelo.
Emerging trends in the category identified by the company include continued development of offerings perceived as premium, “bringing the café experience home,” and “driving one cup of the future.”
More specifically, Mr. Stanziano said, “…The focus is on more premium offerings, darker profiles and ready-to-drink items that fills a gap in the consumer’s decision sets. Additionally, we will continue to invest in engaging with our consumers through social, digital, experiential and traditional mediums.”
Management is forecasting category growth in single serve, which made up 15% of Smucker’s coffee portfolio in fiscal 2014 and is forecast to grow to 26% during fiscal 2019.
The Folgers brand is in one of every three coffee-consuming households, according to the company, and is Smucker’s leading coffee brand.
“With Folgers, we celebrate not only our heritage and quality, but we are investing in our varieties and farms,” Mr. Stanziano said. “This year, we have separate initiatives to support our core, complements and K-Cups.”
K-Cups currently make up 47% of the Folgers business, according to the company.
Smucker introduced its 1850 brand earlier this year. The new brand is positioned within the company’s coffee portfolio as a premium offering and Mr. Stanziano defined the brand as “the coffee of entrepreneurs.”
He called the introduction of 1850 probably one of the biggest in company history. Smucker has invested $30 million in the launch and sees it as a long-term platform.
“… The difference that we think about going forward is that this cannot be a short-term focus,” Mr. Stanziano said. “1850 is a new brand in the category. It’s a platform that we’re going to build off of. So, we have to maintain sustained investment as we think about the next few years.”
Smucker’s partnership with the Dunkin’ Brands Group allows the company to meet the trend of bringing the coffee shop experience home.
“We have the No. 1 item in premium bag with Dunkin’ original, the No. 1 selling K-Cup pod, the No. 1 selling item across five different flavors and the No. 1 cold brew kit on the market,” Mr. Stanziano said. “Our success earned us the 2017 IRI Pacesetter award and the 2018 Nielsen Innovation Breakthrough Award.
“We have more than doubled the brand’s sales since our ownership, and our goal here is to have a true omnichannel, seamless experience for the consumer as we bring the coffee shop experiences home. Our growth trajectory has been fueled by core brand building coupled with on-trend innovation.”
The company’s initiatives will bring approximately 2% annual growth to Smucker’s coffee portfolio, Mr. Stanziano said.
“We will accomplish this through a commitment to business fundamentals, ensuring we have the right product at the right price in the right channel for our consumers, moving with a sense of urgency, growing our Dunkin’ and Café Bustelo in the high single digits, collaborating with our agencies to deliver best-in-class marketing and developing new and on-trend innovation, especially for 1850 and in the ready-to-drink space,” he said.