Starbucks Doubles Down

THERE’S A NEW BEAN IN THE RTD COFFEE grinder, but it’s plucked from the same bush as the category leader. Starbucks, in partnership with PepsiCo, released a three-flavor Seattle’s Best Coffee line in 8 oz. slim cans early this year. At a suggested price of $1.49 each and $4.99 per four-pack, Seattle’s Best represents a value-priced alternative to Starbucks’ main RTD offerings. It also likely represents the biggest move in RTD coffee since Monster and Rockstar dueled over who had the idea for coffee/energy hybrids first.

Despite the valiant efforts of a handful of companies, the RTD coffee category has remained Starbucks’ arena. The brand has kept a Gatorade-like dominance over the field while other brands have scavenged for the giant’s leavings. In the twelve months ending Feb. 21, RTD coffee slipped by 8 percent in supermarkets, drugstores, gas stations, convenience stores and mass market retailers excluding Wal-Mart, according to Symphony/IRI Group. Starbucks slipped with the category, but increased its market share. Frappucino now accounts for 86.3 percent of RTD coffee sales, with Doubleshot picking up another 9.3 percent. While those numbers exclude coffee/energy hybrids, and top hybrid performer Java Monster actually posted sales 22 percent higher than Doubleshot, Frappucino remains the undisputed owner of ready to drink coffee.

The category has proved such a difficult challenge that David Blosser, an account manager with Coca-Cola Enterprises, said The Coca-Cola Co., Inc. has prepared to quietly admit defeat if its joint venture with Illy fails. The beverage giant already scrapped earlier coffee ventures with Godiva and Caribou Coffee, but cut a different path with Illy issimo by initially incubating it with New York distributor Big Geyser. So far, the brand has gotten a steady start. It currently places as the 11th best selling RTD coffee line nationally, but, in such a top-heavy category, that rank amounts to less than $400,000 in sales and a 0.07 percent share.

Hansen, whose recently-unchanged Java Monster line slipped by 11 percent, brought a fresh idea to the coffee energy category by debuting X-Presso. X-Presso’s 6.75 oz. can includes a nitrous oxide-dispensing widget (a la Guinness) that gives the drink a foamy head reminiscent of a barista’s handiwork.

Meanwhile a handful of smaller brands doggedly pursue success in the shadow of their larger rivals. Shock Coffee claims to have more than tripled its sales in some stores last year, and 80-year coffee stalwart Café Bustelo aimed at a younger generation by promoting its 8 oz. RTD coffee at South by Southwest and other concert events. Adina, which launched into the coffee/energy field two years ago with big aims, has regrouped with reduced expectations and a narrowed line. Following the departure of co-founder Greg Steltenpohl, the one-time juice brand renamed its 8 oz. “Natural Highs” as “Barista Brews.” The restage backed the product away from its earlier energy claims and slashed its flavor offerings to two SKUs.

Despite those efforts, Starbucks still reigns supreme, and, by rolling out a value option, the Goliath brand is taking aim at its own leavings. If the category wasn’t already tough enough for smaller brands, it just got tougher. Eventually, Starbucks could falter. Sports drink colossus Gatorade finally has – but it took 40 years. If challengers want to wait for Starbucks to stumble, they’ll at least have plenty of coffee to drink in the mean time.

CATEGORY REPORT: RTD COFFEE
Whynatte. As of March, Whynatte Latte is available at the 30 largest RaceTrac locations in Georgia. Whynatte has future plans to move into the chain’s 30 smaller stores in that state. The brand also signed with United Distributors in November.

Shock Coffee. Shock Coffee introduced a 15 oz. package to supplement its 8 oz. option. Travel Centers of America added the 15 oz. variety to their Iced Coffee set in June and saw a 245 percent increase in sales over the prior year. Other chains, like C.N. Brown – Big Apple stores in Maine, saw similar results.

SoloBrew Corporation. SoloBrew Corp. launched French Press To-Go. The French Press To-Go is a disposable single-serve French Press unit pre-packaged with coffee in a spring-action filter plunger. Just add hot water, give the spring plunger a few pumps and in 2 to 4 minutes, enjoy a freshly brewed cup of gourmet coffee.

Adina For Life. Adina rebranded its 8 oz. slim can coffee offerings as Barista Brews and reduced its offerings to two flavors: Double XXPRESSO and Mocha Madness. Adina will be marketing the line as a coffee product instead of a coffee/energy hybrid.

North American Beverage Company. In 2009, Havana Cappuccino changed its distribution model, appointing food wholesalers to distribute the brand. For grocery sales, Havana appointed Kehe/Tree of Life Foods, MDI Wholesale, UNFI, DPI, and Wakefern. For convenience stores, Havana appointed McLane, Liberty Distribution Co., H.T. Hackney Distribution, Core-Mark, TSN Distribution, L.J. Zucca, J.T. Davenport & Son, Charles C. Parks Co., SouthCo, Long Wholesale Andalusia Distributing and Coastal Wholesalers.

Café Bustelo. Cafe Bustelo, an 80-year-old brand, has reinvented itself to appeal to the young, hip, jetset consumer. The brand made appearances at major music festivals including Winter Music Conference, SXSW, Coachella, Lollapalooza and Perez Hilton’s One Night In Concerts.

The Coffee Bean & Tea Leaf. The Coffee Bean & Tea Leaf launched a new line of bottled café and tea beverages. The line of three coffee- and three tea-based drinks is made with Coffee Bean’s own coffee beans and tea leaves and slightly sweetened.

Hansen Beverage Company. Hansen introduced X-Presso Monster: Hammer in September. X-Presso’s 6.75 oz. can includes a nitrous oxide-dispensing widget that gives the drink a foamy head reminiscent of a barista’s handiwork.

Starbucks. Starbucks subsidiary Seattle’s Best Coffee announced that it has entered the ready-to-drink coffee category with a new line of iced latte coffee drinks. Through the North American Coffee Partnership, a joint venture between Starbucks Corporation and Pepsi-Cola North America Beverages, the new ready-to-drink coffees will be available in major grocery, convenience and other retail stores, initially in the Western U.S.