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Kraft Foods Group thinks it has the right recipe to rev up sales of one of the retiree set's favorite brands.
It's called Maxwell House Iced Coffee Concentrates, a sweetened coffee syrup that is squeezed into water or milk and poured over ice to create an iced coffee. Think of it as Mio with caffeine. The new product, which comes in a 1.6-ounce, 10-serving squeeze bottle priced at $3.99, is part of Kraft's campaign to lure price-sensitive and on-the-go millennials to its 122-year-old Maxwell House brand and, it hopes, keep them as lifelong customers.
Kraft began its Maxwell House refresh last year with a new logo, modern graphics and a blue color scheme, backed by $25 million in advertising. The processed-food giant plans a renewed push in the months ahead, with a heavy emphasis on digital and social media, spaces where smartphone-tethered young people increasingly get their information.
Despite its age, Maxwell House remains an important brand for Northfield-based Kraft; it is one of the company's few products to top $1 billion in annual sales. Maxwell House remains "one of the crown jewels of our portfolio," says Chris McClement, the brand's senior director. Introducing concentrates is a continuation of Kraft's effort to make "the brand relevant to consumers today to drive sales growth for us for the future."
Kraft is joining many other companies in targeting 20-somethings. While only one in three millennials regularly drinks coffee at home -- a percentage far below older age groups -- they're much more likely to consume coffee beverages elsewhere. Nearly half of coffee drinkers under age 40 have a cup away from home, compared with 34% between ages 40 and 59 and just 16% age 60 or older, according to the National Coffee Association USA, a trade group.
Younger people, the association has found, also outpace their older counterparts in consuming sweetened coffee drinks like mochas and frozen blended coffees, a trend Kraft hopes to exploit with its concentrates.
Less black coffee
Millennials, Mr. McClement says, "are drinking black coffee less so than generations ahead of them; the world has changed (with regard to where) consumers get caffeine." Kraft's internal research shows that about 40% of iced coffee is consumed away from home and most likely purchased at a coffeehouse like Starbucks or at McDonald's or Dunkin' Donuts because consumers "lack the confidence to make it themselves."
On top of that, research shows many younger consumers are reluctant to hand over $2 or more for iced coffees on a regular basis, which may provide an opening for the Maxwell House product, which costs about 40 cents a serving.
"Millennials are looking for ways to get coffee more easily and maybe not spend as much as they'd have to at, say, Starbucks or Dunkin'," says Darren Seifer, a food and beverage analyst at NPD Group, a consumer research firm. Kraft, he says, "may be able to connect with them on that level—speed and cost."
The coffee concentrates are a follow-on to Mio, a first-to-market water flavoring Kraft introduced in 2011 that has become a nearly $200 million brand. Packaged in a squeezable container small enough to fit into a small handbag or a pocket, that product also was targeted at millennials.
Bolstered by Mio's initial success, Kraft's innovation team went to work on brand extensions, releasing an energy product that doubled sales in its second year and, more recently, a fitness-oriented version packed with electrolytes and B vitamins.
Tinkering with a category
Mio's success led Kraft to start tinkering with coffee, a category with which it had deep experience. "It was a marriage of three things coming together," says Becky McAninch, Kraft's senior director of innovation. "We had the expertise in inventing this category, we saw explosive growth in iced coffee" and Kraft was midstream in its attempt to reposition and reinvigorate its Maxwell House brand.
After 18 months of experimentation with dozens of roasts, flavors and sweetness levels, parading each in front of focus groups, McAninch's team settled on three for the initial launch: a house blend, vanilla and caramel. The first shipments went out Jan. 12, and the products are beginning to appear on shelves around Chicago in such retailers as Wal-Mart, Jewel and Meijer.
Kraft's Maxwell House product is coming to market at the same time its primary competitor, Folgers, releases its own version: Folgers Iced Cafe Coffee Drink Concentrates. Also sweetened and packaged in a small squeeze container, the Folgers version has 12 servings per bottle and is meant to be mixed with milk. It retails for $3.99 to $4.99 and comes in four varieties: original latte, vanilla latte, caramel macchiato and hazelnut cream.
Maribeth Burns, a spokeswoman for Orrville, Ohio-based J.M. Smucker, which owns the Folgers brand, says the product is an answer to "consumers who enjoy lattes and coffeehouse beverages" and those who "like to have convenience and the ability to adjust flavorings to their preference."
Its primary target audience? Millennials, of course.
Peter Frost is a reporter for Crain's Chicago Business