NEW YORK (AdAge.com) -- The big players -- McDonald's, Starbucks and Dunkin' Donuts -- have gotten plenty of attention for their multimillion-dollar coffee campaigns in recent months. But a smaller, more diverse competitor is stirring things up in its own right: Green Mountain Coffee Roasters. The company has posted triple-digit earnings gains and a 60% sales jump in its most recent quarter.
Insulating it from the recession are a multichannel strategy and diverse growth avenues. "We want to be present wherever a consumer might want to have a great cup of coffee," said T.J. Whalen, VP-marketing for the Waterbury, Vt.-based company, which began as a single cafe in 1981. The company distributes its Green Mountain Coffee brand to supermarkets and offices; sells its Keurig single-cup brewers at major retailers like Walmart; and has partnered with or acquired brands including Newman's Own Organics and Tully's, respectively.
But while the company has been ramping up its presence, it's only recently that consumer marketing has become a part of the equation. Relying on sustainability efforts to build its reputation, the company historically eschewed traditional marketing, considering itself a "discovery brand."
Keurig ran its first national campaign, from Brand Content, Boston, late last year. And Green Mountain Coffee's first branding campaign, from Brand Buzz, New York, made its debut in Boston. The campaigns moved the needle. Sales for the company's fiscal first quarter, ended December 27, were up 56% from the same period a year ago. Mr. Whalen said the company's marketing budget will be growing in line with sales, though he declined to be specific. In 2008, the company spent $17 million on marketing, up 90% from 2006, according to its annual report.
"I would expect that marketing, in general, will go up at least as much as our net sales are expected to go up," said Mr. Whalen, a veteran of Patagonia and Leo Burnett, who came to the company eight years ago as a consultant and now reports to Chief Operating Officer Scott McCreary. "[Marketing] is a well-understood and supported element of the company's strategy."
Mr. Whalen oversees the consumer-direct business, public relations and an internal creative team, as well as brand, product and consumer marketing for the coffee business, while Keurig, a wholly owned subsidiary, has its own management team. In an interview with Ad Age, Mr. Whalen discussed his strategy to stand out with a budget dwarfed by competitors, the retail channel that has been most affected by the recession, and why he welcomes competition in the sustainability space.
Ad Age: How do you break through in the marketplace, when you're squaring off against competitors like McDonald's, Dunkin' and Starbucks that are spending millions?
Mr. Whalen: First and foremost you have to have a great product. The consumer today is smarter than ever and can understand the difference between a marketing message and a great consumption experience.
Ad Age: What about those brands' emphasis on affordable coffee, with the launch of McCafe and Via, for example?
Mr. Whalen: It actually brings some heightened consumer awareness to the category, which we welcome. That increased focus on the category, with a lens of, "Am I getting the best value, the best experience, frankly, we feel that plays to our advantage?" It probably doesn't hurt either that some of the coffee in the McDonald's system in the Northeast comes from us, as a wholesale supplier under the Newman's Own Organics brand.
Ad Age: The company has historically focused on sustainability. How has that focus been affected by the recession?
Mr. Whalen: The way I view it is that challenging times often give consumers either the opportunity or the need to make sure that they're making responsible choices. That's not always a drive to the lowest price but often is a drive toward the best value and a value that allows a consumer to feel that they're making the right choice for their circumstance. ... Making sure that a consumer understands the value of, say, Fair-Trade-Certified coffee and everything that goes into that also helps them feel good about their purchase. Even in difficult economic times, we're experiencing rapid growth in that part of our business. Fair-Trade coffee now represents a third of our total volume. That is up about 5% vs. this time last year.
Ad Age: In the coffee space, there's been a lot of focus on sustainability. Does that hinder your point of difference?
Mr. Whalen: No. We welcome all forms of competition. It probably makes us a little better when we have to compete for the consumer's attention. But we've always tried to be first to market with innovations that deliver value in a responsible manner. Take, for example, our developing, with International Paper, a more environmentally responsible coffee cup. We wanted -- and, in fact, we encouraged others in the industry -- to adopt this. We didn't seek to keep it to ourselves.
Ad Age: Your products can be found in grocery stores, warehouse clubs, convenience stores, food service, mom-and-pop locations and offices. What channel is the recession most affecting?
Mr. Whalen: Office coffee service is where we've seen the greatest softness in our business. It has a lot to do with employment rates. There are fewer people in offices, so there is less coffee consumed in offices. But offsetting that is a value drive from consumers. In the last year or two, they may have been leaving the office for a break to go to a coffee shop. Some of those folks are perhaps electing to stay in the office and are asking the office manager to make sure they have a decent cup of coffee. That business is still growing double digits. But in a world where our last quarter net sales were up 60%, low double digits, to us, feels soft.
Ad Age: What consumer trends do you follow?
Mr. Whalen: Consumers are changing their buying habits, certainly. There are more people spending time at home today than a year ago. Home consumption opportunities we see as increasing. If you were to look at our sales of home brewers, you'd see that we are definitely benefiting from that.
Ad Age: How is that informing marketing?
Mr. Whalen: [We ran Keurig and Green Mountain Coffee campaigns] pretty much concurrently by design to leverage newfound interest in the Keurig system and make sure we were backing that up with some brand loyalty.
Ad Age: Now that your marketing budget is getting bigger, is there more pressure to demonstrate ROI?
Mr. Whalen: Probably not any more pressure on that front from the top than comes from the team. Most of the marketing discipline is, frankly, self-imposed. We cultivate great decision making, and understanding the value of marketing investment is simply a part of that process. I can't imagine any marketing organization will be successful in tomorrow's marketplace without that discipline within the team. It can't come from your CFO.
Ad Age: What is it like to go from being a small company to being the company that's being talked about as the next big thing in coffee?
Mr. Whalen: [Eight years ago I was a] consultant advising on opportunities and marketing programs. I loved the idea of what this company was striving to achieve. I made the right choice in getting onboard. At that time, we were less than $100 million in sales. This year we expect to be somewhere in the neighborhood of $800 million. ... It's exciting.