brewing

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coffee market

SOMETHING’S

BREWING

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here are at least 10,295 Starbucks stores in the United States, according to the company’s most recent “fact sheet.” Named for the first mate in Herman Melville’s book “Moby Dick,” Starbucks has become a whale of a company, just one piece of evidence that we have become a coffee nation. For further proof, consider the fact that coffee has percolated into places you wouldn’t expect—high school libraries, for instance. The Associated Press reported in October 2007, “Coffeehouses are springing up in high school libraries around the country, marking a big departure from the days when librarians sternly prohibited food, drinks and talking.” If school libraries are selling coffee, is it far fetched to think that outdoor specialty retailers could do it? Over the past couple of years, a few outdoor shops have decided to give it a try. “About a year ago we brought it in,” said Kirk Robinson, manager of Lewis and Clark Outfitters in Springdale, Ark. The store sells bags of Silver Joe’s coffee and also offers samples for customers to drink while they shop or relax in a small lounge area. “It’s a good fit, and our customers love it.” The idea of offering shoppers coffee, cider and other hot drinks is not a completely new one for outdoor retailers; many stores have done this during

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ARE COFFEE & OUTDOOR RETAIL THE PERFECT BLEND? BY MARCUS WOOLF

the holiday season. But selling bags of specialty coffee is a fairly fresh concept. One reason we’re seeing it happen is a few specialty coffee companies—ones that use high-quality beans and create unique roasts—are targeting the outdoor specialty market. And one of these companies created some buzz at last year’s Outdoor Retailer trade shows.

A CUP OF JOE During Outdoor Retailer Winter Market in 2007, heavy traffic flowed past the Silver Joe’s booth, despite the fact that it was located in the “back 40” of the Salt Palace Convention Center. That show effectively marked the birth of the Silver Joe’s coffee brand, but the company was already turning heads. Its marketing vehicle—a silver Airstream trailer—occupied the booth and proved to be a stylish and eye-catching feature. Show attendees crowded around, some seeking coffee samples for an afternoon pick-me-up, while others hung around just surprised to see such a robust display for coffee—a fringe product for outdoor retail. Though coffee may be fringe, Cameron Clement of Silver Joe’s said he believes that it will eventually become a more important part of the product mix. “Coffee is ingrained in our culture,” said Clement. And he means not only the American culture, but the outdoor lifestyle as well. Backpackers, climbers, paddlers— all sorts of outdoor enthusiasts—consider an eye-opening cup of coffee an important part of any adven-

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coffee market » Kinetic Koffee offers POP displays for retailer countertops. ture. In fact, the brand was created by a group of friends who frequently went fly-fishing in the Rocky Mountains and before each outing asked the same question: Where are we going to get some good coffee for the trip? After an especially cold and wet day in the river, Clement was sitting, suffering from hypothermia, when inspiration struck. “Why don’t we make our own coffee brand?”Clement thought to himself. At that moment, he noticed an Airstream trailer in a nearby parking lot, and it sparked another idea. “All brands own things. Folgers owns red, Maxwell House owns blue,” said Clement, who has helped develop food products for Procter & Gamble. He thought about the trailer and the fact that coffee vinyl bags are silver before they’re colored—silver could be the signature color for a new brand of coffee. As he and his friends moved forward in developing Silver Joe’s, they also realized that Airstream trailers would provide a unique way to market the brand in a mobile fashion. They eventually approached Airstream and struck up a marketing partnership. Though the company was up and running, the Silver Joe’s team knew that they faced a challenge in getting outdoor retailers to effectively sell coffee. But they focused on the notion that specialty coffee could succeed if it was presented in the same way retailers would sell any highend product. Meaning, retailers couldn’t simply toss coffee bags into bins and hope the stuff would move. No, they would have to highlight the product and give it the same attention and support they would provide any other new product concept. To assist retailers, Silver Joe’s created a turnkey operation, where it supplies shops with attractive fixtures that hold product, plus displays (such as murals) that draw attention, and appliances to create a coffeeservice station. Retailers also receive free coffee to brew and make available to customers. Silver Joe’s also has lines of accessories and apparel, so the total effect is a sort of coffee concept shop. “Retailers are asking for systems that enhance the shopping experience,” said Clement. The Silver Joe’s setup gives greater weight to the product, and the free coffee samples might encourage a person to shop longer and spend more money. Robinson of Lewis and Clark said that Silver Joe’s also works hard to keep the coffee area properly stocked. “It was a benefit to us to have someone help manage our coffee inventory,” said Robinson. “It’s great when you have a vendor that’s so in tune with your store. We’re really partnering in this.” Because coffee companies are trying to 20

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establish themselves in the market, they are keenly aware that they must provide retailers good service and suggest innovative ways to boost sales. Kinetic Koffee, a specialty coffee company based in Arcata, Calif., offers its outdoor retailers a special-label service in which stores can create their own coffee label to be placed on bags of Kinetic Koffee. Andrew Schlegal, manager and co-founder of Great Miami Outfitters in Miamisburg, Ohio, said the label program has worked well. “We started putting our logo on coffee, and we’ve flown through that,” he said. And Mark Ritz, co-owner of Kinetic Koffee, said the label service is now the greatest contributor to the company’s sales growth. Robinson admits that some customers still think it’s odd to find coffee for sale in a gear shop. “A lot of people do come in and say, ‘Why do you carry coffee? This is an outdoor store.’ But it’s really funny because they’ve come back, and this is where they get their coffee now,” he said. Robinson draws attention to the coffee by merchandising it with food products and coffee accessories. Ritz recommends that retailers also use the countertop displays he provides, and place them next to the cash register, because coffee is usually an impulse sale. “Most people don’t go into an outdoor store with the express idea of looking for coffee, so we have to open their eyes to that possibility,” he said. Right now, the challenge for Ritz is to convince more outdoor retailers to open their eyes to the possibility of selling coffee. Though outdoor travelers are obviously a fairly caffeinated bunch, some outdoor stores are reluctant to provide their fix.

ON THE BACK BURNER The Summit Hut in Tucson, Ariz., has traditionally been one of the more successful outdoor specialty stores in the country, and its buyers have not brought in coffee. “It’s a back-burner thought for us,” said Sharon Scott, a buyer for The Summit Hut. “Kinetic Koffee has sent us samples, and they have great packaging and a neat story, and I love the Silver Joe’s concept that you give away the coffee, but we haven’t chosen to go down that path yet.” Scott said that there are issues with floor space, and she’s reluctant to set up a coffee service station because she’s not sure that such a thing would increase the amount of time a customer shops. Plus, it could be a messy hassle. “We’re merchants and not restaurateurs, and we would have to make sure we could execute it with the right sanitation,” said Scott. “It’s in the back of our minds, but we’re not sure that it’s the right concept for us now.”

Though The Summit Hut is not selling coffee beans, nor brewing it for customers, the store is selling Java Juice, a liquid coffee extract that is added to warm water to provide an instant cup of gourmet java. The extract is available in soft packets that don’t tear or burst easily, so backpackers can carry them without fear of having a nasty blowout. “Java Juice does really nice for us,” said Scott. “The packaging is compelling and durable. People use it for backpacking, and it’s a nice thing for travel, or to keep in your desk drawer.” The Summit Hut also sells a wide array of coffee accessories such as mugs and French presses, and Scott said sales of these items have increased in the last couple of years. “You can get a coffee travel mug anywhere and everywhere, but they still sell well for us,” she said. Coffee accessories are hot stuff right now—have you noticed the gazillion coffee mugs displayed at the Outdoor Retailer shows? Still, the trend is not enough to convince some retailers to sell actual coffee. One objection is that margins on coffee sales can be low. “Margins are one of the downsides,” said Ritz. “Because it’s sold in grocery stores, most coffee is sold at a 30to 35-point margin. Our coffee retails for $10.99 for a 12-ounce bag.” That may sound expensive, but he said it’s comparable to an organic micro-roast coffee from Peet’s Coffee & Tea or a macro-roaster like Starbucks. Ritz added that he pays 10 cents to 25 cents a pound more for his coffee beans than companies that sell conventional coffee because his product is certified organic. But the organic nature of Kinetic Koffee is important to Robinson at Great Miami Outfitters. He doesn’t mind making the low margins because Kinetic allows him to sell something that is unique and also environmentally friendly. Still Ritz gets plenty of resistance from outdoor retailers, and he’s a little surprised. “It seems like a no-brainer,” he said. And it’s not like he’s a newcomer to the outdoor industry with crazy expectations. Before launching Kinetic, Ritz worked in sales for Yakima, and for years he worked for retailers and manufacturers in the cycling industry. One thing Ritz finds interesting is that bicycle » W W W. G E A R T R E N D S . C O M

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coffee market » Silver Joe’s serving system in Lewis and Clark Outfitters. shops—close cousins to outdoor stores—are more readily lining up to sell coffee.

PEDDLING COFFEE “It’s very interesting that bike shops—which don’t sell lots of coffee accessories—have very much embraced the idea of having coffee in the store, whereas outdoor shops that sell French presses, hand grinders and coffee mugs tell me that they just don’t see coffee as being their market,” said Ritz. Kinetic Koffee is sold at 145 places, including specialty stores, small grocery stores, restaurants and hotels. Of the stores, 70 percent to 80 percent are bicycle shops and 10 percent or less are outdoor retail stores. So why would bike shops be much more aligned with the coffee trend? Perhaps it’s because cycling, more so than other activities, has long been closely associated with coffee. “Go on any bike ride, and nine times out of 10, it will start, finish or stop at a coffee shop,” said Ritz. “There’s a direct connection between cyclists and coffee,” said Evan Lawrence, cofounder of 53 X 11, a specialty coffee brand that targets bicycle shops. “Coffee has been

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ingrained in the culture of cycling starting in Europe,” he said. Also, coffee has been popular amongst cyclists due to its touted performance benefits. Whatever the reason, “Most shop workers and owners are coffee fanatics,” said Lawrence, so you don’t have to twist their handlebars to convince them to sell some fine brew. Still, the idea of selling coffee is relatively new for bike shops, so it’s hard to predict how successful it will be. Lawrence said coffee’s future might resemble what happened with nutrition products in bike shops. “I worked with Hammer Nutrition, and I was trying to get product into stores that would maybe have a few Clif bars,” said Lawrence. “A lot of shops weren’t really receptive at first, but I would go into those same shops a year later and see a full 10by-10 area on a wall with nutrition products.” He did say that coffee might not gain such prominence at specialty retail because it’s readily available in grocery stores, while many nutrition products are not. But more people in the United States are seeking coffees that are higher in quality than what you typically find on grocery store shelves. The percentage of the U.S. population that drinks specialty coffee on a regular

basis rose from 12 percent in 2003 to 16 percent in 2006, according to the Specialty Coffee Association of America. During that period, casual consumption of specialty coffee rose nearly 10 percent. From 2001 to 2006, total retail sales of specialty coffee (including cafes, kiosks, carts and retailers) rose from $8.3 billion to $12.27 billion. “More consumers are starting to realize what good coffee is supposed to taste like,” said Lawrence. And that includes the people who walk into outdoor stores. “Coffee will become a larger part of the outdoor market,” said Clement of Silver Joe’s. “The question is, who will own that prize?” » Looking for a job? Need to fill a position? Head to www.snewsnet.com/classifieds.

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