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When procter & gamble Co. bought Millstone Coffee in November 1995, some analysts and consultants were puzzled.

They wondered why P&G would bother with such a tiny, mainly regional business, and how a company known for Folgers, Mrs. Olsen and a conservative marketing style could keep from running a hip beverage brand into the ground.

P&G quickly answered the skeptics. In two years, P&G took Millstone beyond its Northwest stronghold to make it a national brand, nearly doubling distribution to 7,500 stores and nearly doubling sales to $180 million to become the top supermarket gourmet coffee brand.

Millstone's advertising may be some of the most humorous ever created by P&G.

When Starbucks Coffee Co. tested its supermarket brand in Chicago last year, P&G ran TV spots by N.W. Ayer & Partners, New York, touting Millstone's victory over Starbucks in taste tests and lampooning Starbucks for being more interested in selling T-shirts and novelties than coffee. The company also dispatched its "coffee cruiser" and backpack-toting "Whole Bean Dream Team" to Chicago and other locales to offer samples.

"Millstone is a very small subsidiary of P&G, and our structure has allowed us to remain nimble to drive growth," says Chip Bergh, general manager of P&G's coffee business, including Millstone and Folgers, and leader of the Millstone marketing team. "The business is run by a full-time leadership team from all key functions."

The team includes "closer than usual cooperation between sales and marketing to manage our direct-store delivery system," says Mr. Bergh, 40, who assumed his current position in early 1997 and has been with P&G for 15 years in various marketing positions.

One of the key things P&G brought to Millstone, and what distinguishes Millstone from other supermarket coffee brands, he says, is a strong, integrated program of TV and radio advertising. The campaign also includes outdoor advertising, in-store merchandising, direct-to-consumer sampling and PR.

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