Folgers cuts the caffeine to rekindle lagging sales

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Procter & Gamble plans to launch a new line of half-caffeinated ground coffee under the Folgers Lite banner in an attempt to jolt lackluster sales.

For years, other players in the ground coffee segment have offered half-caffeinated versions of their ground coffee blends, among them Kraft Foods' Maxwell House Lite brand and Hills Bros.' Perfect Blend, a brand formerly owned by Nestle that is now under the Sara Lee Corp. umbrella. And, while both the caffeinated and decaffeinated segments of the ground coffee category have been declining at a rate of about 5% annually, the light varieties P&G has eschewed until now grew roughly 7% last year, according to P&G sales materials.

CEDING GROUND

The time has come for P&G, despite its leadership status, to cede ground to its competitors. Sales for the regular ground Folgers brand fell 10.9%, while Folgers ground decaffeinated sales fell 13.5% for the 52 weeks ended March 26, according to Information Resources Inc.

"Like a lot of other food categories, coffee is hurting from the growth of foodservice outlets, which have made it difficult to get at-home growth," said John McMillan, food analyst at Prudential Securities. "The introduction of a variety that offers people a middle ground [between caffeinated and decaffeinated] makes sense and might help them grow in this difficult environment," Mr. Mc-Millan said, noting his own experience of hearing people ask for half-decaf coffee while in line at Starbucks.

The new Lite, a half-caffeinated version of Folgers Classic Roast that comes in blue cans and bags, will be targeted at consumers 35 to 64 through print ads in July issues of magazines such as Better Homes & Gardens, People, Prevention and Soap Opera Weekly. The ads, from D'Arcy Masius Benton & Bowles, New York, will be supplemented with coupon inserts in Sunday newspapers July 5, Sept. 6 and Oct. 9.

GROUND COFFEE PRICES

Unlike decaffeinated coffee, which is priced higher than caffeinated varieties, the new Folgers Lite will be priced to compete with regular ground coffee.

P&G spent $61.4 million in measured media on Folgers in 1999, with $23 million of that going toward the faster-growing whole-bean segment of the business, according to Competitive Media Reporting.

In stark contrast to the bleak landscape of ground coffee in supermarkets, Starbucks Corp.'s most recent results show the consumer shift to food-service coffees, with retail revenue up 31% to $870 million for the 26 weeks ended April 2.

In addition to the new Lite introduction, P&G recently changed packaging labels for its ground coffee franchise to clearly delineate its six varieties, among them Breakfast Blend, Special Roast, Gourmet and Classic Roast.

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