Creating Your Own Brand
With Private Label
By Suzanne Brown
Suzanne Brown has found that private label coffees and teas are big business, and one of the most paradoxical enterprises in any industry. We don’t hear much about them because their key to success is, well, private. In fact, because their work is proprietary, there isn’t a market segment devoted to private label coffees and teas - making them, possibly, a sort of C.I.A. of the industry. Yet - and this is the interesting and paradoxical part - there is so much private label coffee and tea on the market that we decided to devote a two-part article on the subject. Part Two will be featured in the August issue of Tea & Coffee Trade Journal.
For this first part, we spoke with: F. Gavina & Sons, Inc. of Vernon, California; Red Diamond of Birmingham, Alabama; Eastern Teas of Cranberry, New Jersey; and Monterrey Coffee Packers of Crystal River, Florida and Monterrey, Mexico. All of these companies sell through most of the traditional channels - foodservice, grocery, Office Coffee Service (OCS), and some specialty - but exhibit differences in focus and style.
Ira Barbakoff is president of Eastern Teas, a 20-year-old tea company that imports and packs 10 million lbs. of tea per year. A vertically integrated company, Barbakoff says it offers one-stop shopping and includes a custom-tailored plan for all tea needs, ranging from sourcing and blending to printing tags on teabags and packaging design. Channels include foodservice with hot and iced teas, bulk tea sales for specialty venues, grocery, institutional and natural products.
“Everything is done in-house,” said Barbakoff. “A prospect calls and tells us what his clientele likes and we create a program to fit those needs. For instance, if you’re a health food specialty store and your customers are requesting certain nutraceuticals such as ginseng or Echinacea, we’ll add it. Ginger, by the way, is the latest spice request.
“After the types of tea are decided, our graphics department creates the packaging design and the product - whether it’s for a large grocery chain or small specialty shops, it is ready for the shelves. We print in four-color on anything that’s needed: multi-sized boxes, packages, corrugated boxes and tea tags.”
Bromley is the branded tea from Eastern Teas and was the first tea offered in decaf. Currently, Eastern Tea uses the CO2 process for decaffeinating. Barbakoff says that Earl Gray is still the most popular flavored tea and that he is seeing a growing demand for decaf. His company helps clients with P.O.S. material, including wire displays, shippers, and a nice box with cutout window. A minimum order of hot teabags is 50,000.
Red Diamond sells both private label coffees and teas, and company officials say that foodservice is its most profitable channel due to the higher quantities in sales. Red Diamond sells to grocery chains as well as foodservice. Higher profits come from foodservice; higher quantity from the retail side. Minimum order is at least a pallet due to the cost of shipping. Red Diamond president Bill Bowron, Jr., says his company is experiencing a strong trend toward younger consumers who are enjoying coffee and tea beverages as the “social thing to do.” He also sees a trend toward the addition of enhanced products, but the only one he uses is chicory.
Another area of growing popularity is the coffee and tea concentrates. Private label customers create their own customized program. The company offers P.O.S. materials and value-added packaging. For more sales opportunities, Red Diamond sells its own brand under that name.
Office coffee is the channel creating the most demand for F. Gavina & Sons, says Tim Cleland, sales manager. Operators have created the most demand as they service a broad range of clients who employ people who consume coffee at work. Minimum order varies, according to Cleland, depending on the type of program the customer wants. Factors include the type of packaging film required (generic or customer specific), coffee blend (existing or custom) and whether or not the private label product is the only item being run for the client.
“If it means additional volume for an existing client, the minimum will be somewhat lower,” said Cleland. “Typically our minimum order is 1,000 pounds per order. What we see small retailers leaning towards is branding. They want to align themselves with a well-established, known roaster.” Additional channels Gavina sells to are institutional, retail and foodservice.
Concerning trends within the private label industry, Cleland comments that, while the demand is still prevalent, Gavina is seeing more companies trying to align themselves with the brand name coffees that are known for quality. Flavored coffees are still most popular in the specialty area. A few years ago retailers did not want their customers to know what roaster their coffee came from. The exact opposite is true today. We have to increase our marketing budget dramatically to account for the merchandising materials our customers request. Gavina does not offer any racks or P.O.S. material to private label customers. His position is if the P/L customers want to market their own product, they should bear the marketing costs.
Another trend is quality. “Price has been placed on the back burner for now,” said Cleland. “People are willing to pay more for a better cup of coffee. The neat thing is, now more than ever, more people know what a good cup of coffee really is and are willing to pay for it.”
While the company sells some private label roasted coffee, it is soluble coffee that has kept Monterrey Coffee Packers in business for over 40 years selling products to the food service industry. According to Larry Elsie, president, its primary business activity is the processing and packaging of soluble coffees. But the company also processes and packages fine roasted coffees for selected markets.
While Robusta coffee comes to mind when thinking about soluble, Elsie said he is currently using all Arabica (due to the current low price) in making soluble. “We do use Robusta and will be using more of it as soon as Arabica goes back up,” he said.
Coffees are grown and processed in Mexico, although some of the coffee comes from other Central American countries, primarily Costa Rica, Elsie points out. “We do not have a gourmet product,” he said. “In the U.S., soluble coffee sales have declined; less than 12% is sold here. But in countries such as Mexico or Eastern Europe, they are very popular. Russia, in fact, is dominated by sales of soluble coffee, even in 100-gram bags. “Poland is our newest market. We are selling them 30-kilo boxes. Our soluble goes out in bulk or glass jars. We work through our sales office here in Crystal River and through broker channels. Our goal is price point, but we have to have in-store promotions…people in the aisles to help market this product. “Our business is a commodity. Instant coffee isn’t dynamic; our only dynamic area is liquid concentrate for foodservice, which is shelf stable without refrigeration.”
All the companies sell decaffeinated products. Monterrey has two grades of decaf: all water and chemical; Gavina didn’t comment on which process is used, but its decaf accounts for 8-15%, depending on the market. Gavina’s institutional usage is much higher than retail. Both Eastern Teas and Red Diamond use the CO2 process.
In Part Two of this story, we will delve into the private label concentrate market, as well as continue interviewing companies that provide these programs around the world.
Suzanne J. Brown is a senior consultant with Hope-Beckham, Inc., a totally integrated marketing/public relations firm based in Atlanta, Georgia. She can be reached at (404) 636-8200, ext. 232 or e-mail: firstname.lastname@example.org.
Tea & Coffee - May/June 2001
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