Case Assignment
Waking Up the Coffee Industry
About 25 years ago the number one drink in America was coffee. The trend was not good for the coffee industry however. From the 1960s to the end of the 1980s the sale of coffee declined. By the end of the 1980s soft drinks had become the number one drink in the United States.
The history of coffee sales is revealing. The original colonists were mostly tea drinkers bringing the habit with them from England. There were some coffee drinkers in the Dutch colony called New Amsterdam. In 1773 the colonists dumped hundreds of chests of tea into Boston harbor because of taxes and America became a coffee-drinking nation.
By 1962 coffee sales were up to $1 billion a year and three fourths of the population drank an average of over three cups a day. The market looked so good at that time that Procter & Gamble bought Folgers in 1963. From 1963 on however coffee sales have declined.
What happened in the 1960s to change the market? A major factor was the battle between Pepsi and Coke for the teenage drinker. Pepsi developed the theme of the Pepsi Generation. Coke responded with themes directed toward young people as well. Coffee ads meanwhile were directed toward the over-35 crowd. The spokespeople for coffee were middle-aged women such as Mrs. Olsen who promoted Folgers Coffee. Meanwhile the Pepsi generation grew up and took their preference for soft drinks with them.
More recently coffee producers have been trying to woo back younger drinkers. Nescafe Silka for example is a "smooth lighter coffee" aimed at 18- to 35-year-olds. Another campaign is aimed at the new generation of college students. The Coffee Development Group has 50 "coffee houses" on college campuses providing a coffee grinder a brewer and a cappuccino machine among other supplies. The idea is to get students back to drinking coffee. Recent studies have found that students are drinking soft drinks for breakfast. Coffee makers want to change that trend back to coffee for breakfast.
Meanwhile coffee shops such as Starbucks are recognizing resurgence. They are cutting into the business of companies such as Dunkin' Donuts that have a much smaller selection. One problem is that the price of specialty coffees has increased dramatically partially because of the huge demand. This has cut into the profits of coffee shops. Meanwhile the sale of canned coffee continues to decline. Now the consumers have had a taste of fresh-brewed coffee that is what they prefer regardless of the cost.
1. What would you recommend to coffee producers to win the college market back to coffee?
2. Would you develop different strategies for regular versus decaffeinated coffee? Why or why not? Which would you emphasize for college students today or would you try to sell them both?
3. What kind of marketing communication system might you establish to keep in touch with students and other young coffee drinkers?
4. You have talked with many college students and heard what they say about coffee versus soft drinks. What has your marketing intelligence system told you? What recommendation would you make to coffee producers based on that information? Would a focus group help to confirm those impressions?