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CINCINNATI-Procter & Gamble Co. may soon wake up to something besides Folgers in its cup.

P&G is close to acquiring gourmet coffee roaster Millstone Coffee of Everett, Wash., one of the top three U.S. retail specialty coffee brands, an industry consultant who has worked with Millstone in the past told Advertising Age.

"They're coming to the end of negotiations," said Dan Cox, president of Coffee Enterprises, a Burlington, Vt., specialty coffee research and management company. "Everything could fall apart in the last hour, but they're both negotiating in good faith."

A P&G spokeswoman wouldn't confirm or deny the talks. Millstone President Phil Johnson would only say, "That's a rumor and I have no comment."

"This deal makes a lot of sense," said Tom Pirko, president of Bevmark, a New York beverage industry consultancy. "All three of the big roasters [P&G, Nestle and Kraft Foods] know the specialty business is where the growth is. And this kind of strategy is ultimately the only way the Big 3 are going to get in."

Sales continued to drop for regular and instant coffees last year; the action was in specialty brews, with projections that they will account for 30% of the market by 1998 (AA, June 5).

Mr. Pirko said the deal would create a major challenge for P&G to learn how to market in a significantly different segment than category-leading Folgers. The acquisition could also create a clash of corporate cultures that he likened to that of Quaker Oats Co. and Snapple. "It's a creative challenge but one that I think has really fine opportunities," he said.

Millstone's agency is Sorensen Roberts & Hansen, Seattle.

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