"The overall coffee industry is $20 billion, and there's a lot more to it than just brewing, where we've concentrated over the last 30 years," said Alejandro Pena, VP-global marketing for Mr. Coffee, which is part of the company now named American Household. Mr. Coffee plans over the next year and a half to expand the brand via licensing partnerships across a variety of coffee-related package-goods categories, including coffee creamers (dry and liquid), ready-to-drink coffee and coffee filters.
It's an ambitious plan for American Household, the name Sunbeam adopted after emerging from bankruptcy in December. Earlier this year, the company was also beset by an accounting scandal that resulted in two former executives settling civil charges with the Securities and Exchange Commission.
Now, American Household is going forward with its plans and is counting on licensed partners, Mr. Pena said, to bring in "a lot more critical mass in terms of investment dollars to support our brand."
After a four-year hiatus from traditional media, the marketer launched an estimated $5 million print campaign late last year from Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, New York, dubbed "Mr. Coffee Moments." The ads featured talk-show host Carson Daly and snowboarder Chris Klug in situations aimed to show the role of the Mr. Coffee brand in helping consumers enjoy their coffee experience. The campaign will be continued later this year featuring a yet-to-be-announced celebrity along with a sponsorship of Time Inc.'s People live mall tour in 10 markets and a $1 million sweepstakes supported by radio ads.
Mr. Pena expects that the new partners, including its ground coffee licensee Creative Marketing Group, will help fund additional advertising and promotional efforts for cross-selling, cross-promoting and co-marketing initiatives that leverage Mr. Coffee as the complete coffee experience.
Creative Marketing launches Mr. Coffee branded coffee into an extremely competitive arena at a time when the category is down roughly 5% and leading players Folgers (owned by Procter & Gamble Co.) and Maxwell House (owned by Kraft Foods) are struggling. According to Information Resources Inc., ground coffee sales dipped 4.3% to $1.6 billion for the 52 weeks ended March 23. While Folgers's base business grew 14.1% to $383 million, premium line extension Folgers Coffee House dropped 50% to $70 million. Maxwell House's base brand fell 4.1% to $274.4 million and its premium extension, Master Blend, lost a more drastic 10% to $119 million.
Creative Marketing President-CEO Rick Bailey said while research found that 55% of consumers said they would not trade brands away from Folgers or Maxwell House, that still "leaves almost 50% of the business." He finds that, combined with the statistic that 56 million homes in the U.S. have Mr. Coffee coffeemakers, encouraging. Beginning in August, Creative Marketing will launch a print and in-store effort in 12 major markets, and will use the roughly 17,000 Mr. Coffee coffeemakers Mr. Bailey said are sold daily as sample vehicles, offering coupons for the new coffee.
Similar initiatives will be levied for creamers and ready-to-drink coffees over the next 12-to-18 months, according to Mr. Pena. "We're moving in an aggressive manner into very exciting times for the brand," he said. Ready-to-drink coffee sales grew 13% to $120 million for the period ended March 23, according to IRI, led by Starbucks' Frappuccino. Nestle leads both the $277 million shelf-stable coffee creamer segment and the $569 million refrigerated coffee creamer segment with its Carnation brand, which grew 5.3% to $142 million in shelf-stable, and 12.9% to $365 million in refrigerated.