P&G TAKES MILLSTONE COFFEE INTO MAIL-ORDER: TEST MOVES BRAND TO HIGH-PROFIT ARENA ALREADY INHABITED BY KRAFT

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Supermarket coffee rivals Kraft Foods and Procter & Gamble Co. will face off in the upscale mail-order arena as P&G moves in with a test of its Millstone brand.

P&G, which has seen sales of its No. 2 supermarket coffee brand Folgers slide in recent years, has launched Millstone Signature Blend mail-order coffee. The program custom-matches consumers to various blends of premium coffee, depending on taste preferences indicated through questionnaires.

DIRECT MAIL, PRINT ADS

P&G is backing the test with direct mail and print ads by Rapp Collins Worldwide, New York, including an insert in the March issue of Martha Stewart Living.

The mail-order coffee market is worth an estimated $100 million, said Dan Cox, president of consultancy Coffee Enterprises.

Kraft, marketer of top retail brand Maxwell House, has built its Gevalia and European Coffee House mail-order brands into an estimated $60 million business since 1984, Mr. Cox said.

The delivered price of P&G's Millstone is 15% to 20% lower than Gevalia.

Kraft put more than $5 million in print and direct mail ads behind its programs last year, according to Competitive Media Reporting.

Starbucks Coffee Co. does about $17.8 million a year through various direct marketing channels, including America Online, a spokesman said.

The mail-order market pales beside the $3.3 billion supermarket category, but margins for mail-order businesses can be much higher than with supermarket channels, Mr. Cox said.

"What really makes Millstone Signature Blend unique is that we help custom-match people's taste to the blend of coffee," a P&G spokeswoman said.

She said the program is an opportunity to build on the Millstone business, a $22 million supermarket specialty brand, according to Information Resources Inc.

SUPERMARKET REVAMP, TOO

P&G also is updating Millstone's supermarket product with a new logo. It launched new TV and print advertising last year via N.W. Ayer & Partners, New York.

Millstone got $2.8 million in ad support last year, CMR said.

The Millstone test comes as supermarket unit volume erodes for P&G's Folgers, down 6.5% in the 52 weeks ended Jan. 28, IRI said. The category as a whole is down 4.5%. Unit volume was up 0.9% for Kraft.

Specialty coffee is the fastest-growing segment, having captured about 10% of the supermarket category in recent years.

But despite interest from mass marketers, Mr. Cox doubts the long-term potential of mail-order coffee.

"Twelve years ago it was a novelty," he said. "And because there weren't so many specialty stores, there was some validity to it. That's not the case nowadays."

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