Private Label Coffee: Making a Name for Itself

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By Dan Shryock

Private label products, coffee and tea included, are rapidly improving their product quality and introducing innovation to capture the attention of price-conscious consumers who want good products at great prices, industry observers say.

“I believe quality has been one of the key drivers in the growth of private brand,” says Clay Dockery, Massimo Zanetti Beverage USA’s corporate brands division v.p.

Private label coffee sales in all forms reached $1.39 billion in 2017, according to the Private Label Manufacturers Association (PLMA).

Ground coffee under private label garnered a 15.1% share and $1.2 billion in sales last year, PLMA reports, while whole bean sales gained 16.2% of the market and $73.8 million in sales. Flavored coffees and substitutes under private labels performed even better. Flavored coffee took a 20.5% market share and flavored coffee substitutes earned 30.8%. Soluble coffees came in at 9%.

Massimo Zanetti’s coffee portfolio is rich with household names for US consumers. Chock Full O’Nuts, MJB, and Hills Bros. are three of many familiar domestic brands. The list grows with the company’s international products, topped by Segafredo Zanetti.

Yet the total amount of coffee Massimo Zanetti produces for its private label customers represents a significant amount of their total offerings. And, Dockery says, all production is subject to rigid quality control.

“I often share with people that private brands have developed a second line of quality visibility,” Dockery says. “Retailers also have very robust quality assurance programs. You have two checks for quality when purchasing a private brand.”

Angelo Campanella, Club Coffee’s vice president for channel development in the United States, says private label coffee offers quality on par with major brands.

“I’ve seen a lot of parity,” Campanella says. “Coffee is a commodity, there’s no secret recipe. There’s been a lot of quality improvement [among private label products]. There are a lot that rival if not beat national brands in taste and quality. The American consumer understands that the private label is broadly accepted.”

Positioned for innovation

The growth of private label coffee sales also can be attributed to product innovation. While customers look for competitive prices, they also want their coffee to reflect their interests in the environment and sustainability. Private label manufacturers are positioned to respond with innovations that suit both their business customers and consumers.

“Innovation is one of the most popular words in the private brand space, but coffee is a little more challenging,” Dockery says. “I would say that (private label products) have been leading innovation recently but I see the gap narrowing. The big brands have come to the realization that they have to be nimble.”

For example, he says, a major brand may produce a “limited time only” product as way to quickly get a new idea on store shelves. “The line has blurred quite a bit over the past several years,” he says.

Single-serve products – cups, pods, and espresso capsules – are an important part of Club Coffee’s product line so when customers expressed a need for environmentally friendly materials, Club Coffee developed the PurPod100, a 100% compostable single-serve pod for coffee, tea, and other hot beverages.

“We’re primarily a private label and co-manufacturing company. That’s what we’re about,” Campanella says of the Canada-based full-line roaster and co-manufacturer. “The advantage for our customer partners is that we’re focused on their brands and their needs.”

Everything in the PurPod100, first introduced in 2015, is plant-based. Even the pod ring is made of coffee bean chaff, a waste product from the roasting process. The pods are certified compostable meaning all materials break down within 90 days once discarded in a commercial composting facility. And, with Club Coffee producing “hundreds of millions of pods” each year for its private label customers, Campanella says, the environmental impact is significant. The PurPod100 is certified 100% compostable by the Biodegradable Products Institute (BPI).

“We want to know how we can help our customers achieve their goals,” he says. “We put the science behind it to make sure it works. We did the field work.”

Single-serve pour over

Meanwhile, in Southern California, NuZee, Inc., is marketing a single-serve pour over drip cup already popular in Asia. The pour overs filled with 100% arabica grounds are sold under NuZee’s Coffee Blenders and Twin Peaks brands as well as to private label customers.

NuZee already has found success in Japan and South Korea with wholly owned subsidiaries there, says Travis Gorney, co-founder, president and c.o.o. They brought that technology to Vista, Calif., and provide services from sourcing and roasting to the final package. The company announced in October that it secured $1.4 million in new equity financing to continue its growth.

“We do everything from sourcing the coffee to white labeling and co-packing,” Gorney says, explaining that a new, larger production facility is planned in Texas. That expansion will allow NuZee to exceed the current 60-million cup annual capacity in Vista. “The consumer can expect to see this product nationwide at national retailers late in 2019 to the beginning of 2020.”

The company markets the drip cup as a “craft, quality pour over with anywhere convenience.” NuZee is positioned to deliver its products to its more than 20 private label brands for consumers who seek convenience in the kitchen, at an office desk or around a campfire in the wilderness.

“We could see a void that needed to be filled,” Gorney says. “We’re providing very convenient coffee but reducing the [environmental] footprint down to almost nothing. It’s going to take more than us to pioneer a new delivery method in a country the size of America but this [pourover method] is going to displace what’s going on in single serve. We believe it’s going to be the next revolution in single-serve coffee in America.”

Millennials and online shopping

The growth of Amazon’s private label AmazonFresh products, including whole bean and ground coffee, underscores opportunities for private labels to reach the digitally driven millennial generation.

Consumer research conducted in 2014 by Surveylab for PLMA made the following observations:

• Almost half of millennials surveyed believe that supermarkets, food stores, drug stores, and discount stores will look dramatically different in the future.

• A third of those surveyed believe many well-known national brands will no longer exist.

• Half of them buy more store brands than their parents.

• Brand loyalty is not a major reason to buy. When a specific national brand they wish to purchase is not on the shelf, 4 in 10 choose the store brand.

• Value is the most important reason they opt for store brands.

Most coffee brands now have e-commerce portals and that’s a good thing because studies indicate that more than 70% of millennials frequently shop from their laptops and mobile devices.

“There’s no question that Amazon is ripe for tremendous growth in the private brand space,” Dockery says. “There’s no doubt in my mind that they’ll win in the marketplace with their brands.”

Gorney agrees, indicating that he sees online businesses taking more market share. “The store chains have been forced to be more competitive and have to offer more value for the consumer,” he says. “The gap has narrowed and the perception of store brand vs. national brand has become much more acceptable. Millennials are price conscious while keeping quality in mind.”

“Millennials seek out a specific coffee origin. If they love Ethiopian they seek out high quality Ethiopian, not a specific brand’s Ethiopian,” Campanella adds. “If you follow what happened in craft beer, Millennials are doing the same thing with coffee. They are willing to pay more per pound because they want to understand the transparency, the sustainability, and the local story of their coffee. That’s a boon for local roasters,” he said.

It’s the price, not the brand. In the end, it’s not what you buy but where you buy it and how much you pay. “A lot of the national brands have significant advertising budgets. Marketing, advertising, it all costs money,” Campanella says. “Private brands start with the cost of the product. We’re leaving it up to the retailer to decide how much they want to spend [to promote] their private brand.”

To make a point, Campanella compares two major US retail chains with their own successful private label brands. “Once you trust Costco’s Kirkland Signature brand, you can trust it across the store. The same thing is true with Trader Joe’s,” he says. “[Consumers] trust the Trader Joe’s brand. That’s the difference. And the price advantage is a key benefit Costco and Trader Joe’s offer to their shoppers.”

“The American consumer is realizing a brand is simply just a brand,” Campanella says. “At the end of the day, something like coffee is about the consumer’s experience and not the brand itself.”

Learn more:

Club Coffee – www.clubcoffee.ca

Massimo Zanetti beverage Group – www.mzb-group.com

NuZee Inc. – www.mynuzee.com and www.pourovercopacking.com

Private Label Manufacturing Association – www.plma.com