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CLEAN UP IN THE COFFEE AISLE

Making Grocery Store Sales
Work for You

GROCERY STORE SALES: they’re tempting, right? They offer a chance to hit a whole lot of customers at once, to increase your sales and visibility, and to possibly expand beyond your current sales region. Plus, there would be something incredibly satisfying about seeing your coffee in its pretty bags or bins every time you hit your local store.

      As coffee-buying venues, grocery stores rank right up there. Although traditionally a marketplace for the big guys and canned coffee, more and more stores are now making shelf space for both commercial and specialty coffees.
      While they might seem like great sales all wrapped up in a pretty package, grocery stores aren’t for everyone. Just ask the roasting companies that have already ventured there.
      “We’ve been doing grocery for 20 years and it’s a long row to hoe,” says Jerome Eberharter, founder and CEO of White Cloud Coffee. “It can be very lucrative, and it used to be relatively easy to get into grocery stores because there wasn’t any competition. Now it’s fiercely competitive and you have to add a layer of costs into your business to support additional expenses like distribution.”
      Even the companies that have a firm grasp of grocery sales, like Peet’s Coffee & Tea, which is expected to offer their product in more than 5,500 stores by the end of the year, know that it’s not an easy gig. “There are over 24,000 traditional grocery stores and in excess of 100,000 new items that get introduced each year,” says Steve Rovner, general manager of grocery-DSD for Peet’s Coffee & Tea. “Less than five percent of them make it.”

MAKE YOUR LIST

How to ensure you’re one of those five percent that make it? Well, first you ask if grocery is truly right for you.
      Just like you wouldn’t go grocery shopping without a list (or maybe you would, but you might forget at least one important thing), you shouldn’t consider entering the grocery trade until you’ve made a list of pros and cons. What are the risks? What are the benefits? Only after you weigh both sides can you make a decision on taking that aisle walk.

Pros

Increased Sales/Visibility

This is probably the number one reason that most people go into grocery store sales. There is potential for increased sales and increased branding for your roasting company. Depending on the stores you are in, this can also help solidify your company’s image; selling in small, natural food stores, for example, gives consumers the impression that you’re a small company with a natural focus, while selling from numerous stores in a large chain can help brand you as a national company.
      “The grocery store is where most people buy their coffee, and that’s likely to continue,” says Rovner.

Increased Stability

For wholesale roasters, grocery stores are also potentially more stable than cafés and require little to no training since consumers take the coffee home to make themselves.
      “We’ve really pushed more for grocery in the past few years than cafés in a lot of ways,” says Paul Schuster, general manager of Raven’s Brew Coffee. The company, which has roasteries in both Washington state and Alaska, sells coffee to both small-niche stores as well as large companies like Safeway. “For us, the reality is that grocery stores are very consistent, they pay their bills consistently, they don’t go out of business. In the end, it costs us a lot more to go into cafés than grocery stores.”

Cons

Increased Costs

Grocery sales, like anything else, have a number of hidden costs that roasters may not take into account at first.
      “There is a pipeline of costs that goes into supporting grocery store sales, such as paying for your own displays to figuring out how your coffee gets delivered,” says Eberharter. “So you have increased volume and increased visibility, but your margins are compressed.”
      Delivery, storage and shipment costs can be a concern. In addition, some stores also charge placement and return fees for your coffee.
      “A lot of chains charge you a placement fee to be there because it’s a risk to take your coffee on in case you go out of business or the coffee doesn’t sell,” says Eberharter. “It’s controversial because small roasters can’t afford to do that, but the big coffee manufacturers have gigantic marketing dollars and can more readily afford that.”

GET IN THE DOOR

FILL YOUR CART

Once you get your first yes or even your first maybe from a grocery store, it’s time to take stock and figure out some of the details of the process. There are a number of steps in the process to ensure that the coffee makes its trip from your roaster to the hands of grocery store customers.

Distribution

How will you get your product to the store? The answer actually depends a lot on the grocery company themselves. Some have their own system of distribution channels and the only option is to use those. Others will leave the choice up to you.
      There are typically four ways of getting coffee from the roastery to the store:

1. Direct-store delivery

This is where you own the delivery vehicles and you deliver the coffee yourself. It also potentially means that you’ll have more control over the product’s quality and placement, as you’ll likely be setting up the coffee yourself.

2. Distributor

This is where you use a major distributor. Typically the distributor will purchase the coffee from the roastery and then put it in the store themselves.

3. Shipping

This is beneficial for those roasters who have small quantities of coffee for sale in various locations in the U.S. It also means you’re relying on the store to set up and take care of your coffee.

4. Grocery

This is where the grocery company is essentially your distributor. They’ll likely purchase the coffee from you and then take care of transporting it from the roastery to their storage facility or store.

Obviously, each system has benefits and negatives, mainly based on cost and the amount of control you’ll have over the end product.
      “We don’t use distributors, we ship it,” says Schuster. “Part of the reason we can do that is that we use smaller chains which understand that small vendors like us can’t use a distribution service. Do we wish we could put the coffee on every shelf instead? Absolutely, because no one’s going to do it like we can. Instead, we develop relationships with the individual buyers of each store and we hope that helps them want to take care of our product.”
      For larger companies, it makes sense to hire an outside distribution service. In many cases, the added costs are well worth the other trade-offs. “If you’re delivering, you have to do all of the stocking and the cleaning,” says Franklin. “Many of them have very specific delivery times as well, so you would have to work around that.”

Display

The next question to ask is how you’ll handle the display and sale of your coffees. Do you want to sell only pre-pack? Only bins? Both? In addition, you’ll need to decide how important placement is. Coveted spots—like the eye-level shelves and the end-caps—usually cost additional money or a minimum number of sales.
      “Eye-level is the most sought-after spot,” says Franklin. “But it’s a catch-22. If you don’t move product, you won’t get better placement and you won’t get better placement if you don’t move product.”
      Pre-packs are the simpler of the two options, as they take up less space. In addition, they can be labeled with a roasted-on or use-by date to ensure that consumers aren’t getting old versions of your coffee.
      Bins are more complicated. While they create a way to offer more product in a smaller amount of space, there is more concern about quality, as old coffee can be left in bins and it is harder to ensure that bins are properly taken care of or cleaned. In addition, some stores require you to actually supply the cabinetry and/or bins themselves.
      “Each store will come with their own rules,” says Franklin. “Some purchase their own bins and then bill us for it. Others provide everything. Still others expect you to purchase the cabinets and even the lighting.”

Returns

The last thing to consider is how you’ll handle coffee that doesn’t sell. Ideally, you’ll be able to manage your overstock by keeping close track of sales numbers and making sure that you’re not sending off too much coffee. But grocery stores sales can fluctuate, and there will be times when you just don’t sell as much coffee as you predicted.
      Many stores will expect you to buy back the coffee that didn’t sell, but they’re not likely to send back your coffee. So, unless you’re actively involved with stocking the shelves and rotating product, you’ll have to take it on faith that they really didn’t sell any of your coffee last month. In addition, you’ll need to ensure that the old coffee isn’t being resold somewhere—some roasters tell stories of finding their coffees in discount grocery stores after they already “bought it back” from the original store.

CASH OUT

Ok, you’ve figured out how to get your product delivered in a timely manner, you’ve snagged some shelf space and you’re ready to roll. Before you head to the check-out line, make sure to use these tips to increase your sales, and to increase your chances of long-term success in the coffee business.

Placement

As mentioned earlier, placement can make or break your bottom line, but it’s not an easy thing to get. There are a couple of ways to increase your chances at getting a stellar place in the aisle. Some stores allow you to pay extra money to “buy” a spot, while others are more likely to give you a hot spot if you have great packaging. Some roasters offer free push trays or banners, while others build custom bins and cabinets to entice stores.

Packaging

To catch the eye of the consumer, it also helps to have great packaging. While some consumers are going to buy based on their knowledge of your quality, most will do the same thing they do with wine—purchase a product with a label that attracts them.
      “There is only the shelf to speak for your coffee,” says Rovner. “No helpful counter staff, no coffee shop ambiance, displays or cups of freshly brewed coffee to go along with pounds of beans. Your package has to work awfully hard.”

Sales and Coupons

Sales are another great way to move more product and entice new customers to try your coffee. As with everything else, however, there’s a price. Often, in order for the store to sell your coffee at a sale price, you’ll have to give the store a discount as well.

In-Store Demos

Another great way to get people interested in your coffee is to do in-store demos, where you brew up some of your coffee and hand it out to consumers. “Demos are helpful,” says Schuster. “They’re hard on your employees, because it’s hard work to get that done, and it’s an investment of time and the portable brewer, but it’s something you’ll want to consider.”

Tell the Story

One of the difficulties with grocery stores is that there’s no one there to talk about your coffee. Consumers are left to fend for themselves when it comes to information about the coffee, its origins and its roasting style.
      “One thing we struggle with is how to tell more of a story, to be able to talk more about your product,” says Franklin. “It’s challenging in grocery because you can only have so much information on a bin label or package.”
      To alleviate this, many companies place small information cards near the coffees or use a different, more complex label for their store coffees. Portland Roasting has recently introduced small video screens to their bin displays. “We put pictures of the farms, as well as a bunch of information about our farm-friendly direct coffee,” says Franklin. “It’s a great way to give people additional information.”

IN THE BAG

Whether you want to try your little local grocery store around the corner or you have dreams of seeing your coffee in the country’s biggest chain, grocery store sales have the potential to be beneficial to your company. You just have to make sure you’re prepared for the potential increase in costs—and work—that it takes to add grocery stores to your client list.