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10th Annual Coffee and Tea Flavor Review (continued)

Large fast food chains in the United States such as Dunkin' Donuts now offer flavored coffee as an everyday part of its menu, do you think other large national fast food chains will follow their example? Do you know of any European chains that offer flavored coffees?

While our specialists agree flavored coffee may fit with the demographic profile of some fast food chains, it may not address the needs of all. Paula Boudjouk comments, "Dunkin' Donuts has done a tremendous job of marketing flavored coffees as an everyday part of their menu, both in hot and iced forms. If other national chains are smart, they will follow this lead, but only after researching good marketing, good product, and proper customer targets. Not every fast food chains is cut out to sell flavored coffee, so this may not work for every one."

Jeff Nichols points out "The large fast food chains by design try to market to the broadest customer base. Within the coffee category, this would include specialty users as well as ground and roast consumers. With that in mind, the addition of flavored coffee to the product mix would not offer that large of growth potential. Flavored coffee still only holds a 4-6% market share in the total coffee category so when considering the costs associated with the addition of equipment, cross contamination concerns and issues related to preparation/cleanup, the net yield to sales volume would be so small making it tough to justify. However, as the demographics of a particular chain more closely aligns with those of upscale appeal of the specialty drinker, the addition of flavored coffee becomes much more likely."

William Palmer elaborates on the large variety of flavored coffee options available to the chain operations. "Fast food and convenience chains are serving their market for flavored coffee in several ways. Those with a strong coffee orientation - donut, bagel, and convenience chains - sell brewed, flavored coffee of the same high quality as their unflavored coffee. They have enjoyed sales increases with a profitable item to consumers that were not previously coffee drinkers. Fast food chains are capitalizing on the trend by taking a low maintenance approach to market entry, offering flavored instant drinks like granitas and cappuccinos. They can easily replace these items when the next hot seller arrives."

As for the European market, Bill Sieber is not aware of any European chains presently offering flavored coffees, but notes "they do offer syrups to their gourmet coffee customers." Jeff Nichols offers an explanation, "that market is still a few years in development behind ours and appears to be following the same progression as the U.S./Canada with the smaller- to medium-sized roaster/retailers driving the flavored coffee category development."

What do you think has had the most influence on the coffee/tea flavoring industry in the last decade?

Paula Boudjouk credits several influences including consumer education about flavors, the concept of flavors enhancing a beverage and not overpowering it, experimentation with flavors to create unique and unusual products, improvements in the manufacturing of flavors, and the versatility of the flavorings used. "Flavorings have had an impact on all types of hot and cold beverages, whether using flavored beans or flavored syrups, and have kept a market going that would not otherwise be stable." As evidence, she points to the growth of tearooms, the use of herbal teas with added flavors, the increased consumption of cappuccino and iced blended coffee drinks among consumers 1824, and the fact that women are still more likely to consume a gourmet coffee beverage than men.

Jeff Nichols' response to the question was "give credit where credit is due, to the entrepreneurial spirit of the small- and medium-sized roaster/retailers. First-hand, they saw the need to develop coffee products to appeal to people other than coffee purists. Flavored coffee and coffee beverages worked perfectly - just enough coffee character to be recognized within the coffee category but enough augmentation to remove many of the attributes that prohibited those consumers from liking regular black coffee. Without their belief and conviction, flavored coffee would never have gotten off the ground. The rest of the coffee industry learned from their success and have now made flavored coffee the commonly accepted product that we all know."

William Palmer considers the definition of the market as a determinant as to what influences have been most significant. He explains, "The powdered coffee based beverage segment is huge with widespread distribution. Since this magazine is for the specialty market, I'll only consider the influences on whole bean, ground, and brewed flavored coffee. Ten years ago, retail coffee shops were the primary venue for flavored coffee. These were destination shops, people had to travel to the shop to get good flavored coffee. Their success in establishing flavored coffee as a segment rather than a fad led to the most significant change in the industry."

He continues, "now it is difficult to go through the day without having the opportunity to buy flavored coffee, for home use or brewed. The supermarket shelves offer several brands, each with numerous varieties. Bagel, donut, and convenience shops all offer fresh brewed flavored coffee. While specialty shops introduced and established these products, wholesale roasters and national chain restaurants have made it a part of everyday life."

Shea Sturdivant Terracin is a past officer of the Specialty Coffee Association of America, a partner in The Coffee Associates, an international consulting firm bringing coffee solutions to the marketplace, and an administrator at Bauder College in Atlanta, Georgia. You can contact her at coffeelady@mindspring.com


Tea & Coffee - January/February 2001
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