March 2017 | Christabelle Noronha
A blend for the future
David Allen is sold on coffee, and not just because he has an obligation to sing praises of the bean. The senior vice president, marketing and sales at Tata Global Beverages (TGBL), speaks to Christabelle Noronha about how Eight O’Clock Coffee has evolved to stay in step with trends that are shaping the North American market for the beverage. Talking about taste twists and the ‘wine-ification’ of coffee, Mr Allen explains that consumers are interested in exploring the romance of coffee. Excerpts:
What place does Eight O’Clock occupy in TGBL’s overall business?
TGBL operates in three verticals: tea, coffee and water. Eight O’Clock is the largest coffee brand in the TGBL portfolio. It is the driving force of the US business, accounting for over 80 percent of sales.
Since its acquisition by TGBL in 2006, what has changed for the company and the brand?
The brand has grown quite significantly in the last 10 years. Retail sales have gone from $140 million a year to $330 million. Eight O’Clock now participates in the pods or single serve segment, which now accounts for 50 percent of our retail sales and 40 percent of category sales. Our manufacturing facility in Landover, Maryland (USA), has also seen significant upgrades in both personnel and performance during this period.
Please tell us about the markets where Eight O’Clock is present. Which of these are priorities for the brand, and why?
We currently operate in the US and Canada. These are still the priority markets for the brand and we believe there is ample opportunity for growth. We also believe the brand has the ability to expand beyond its North American borders.
How has coffee drinking evolved in the markets where Eight O’Clock has a substantial presence?
Coffee consumption has evolved quite dramatically in the US. It has always been a popular beverage, but the experience, the romance, the variety and the quality are now much more relevant to the consumer. For instance, many have suggested that the coffee shop experience was the second wave for the beverage. Coffee shops allowed consumers to enjoy high-quality, gourmet beverages outside their homes.
We are now in wave three, where consumers are experiencing what’s being referred to as the ‘wine-ification’ of coffee. Consumers can learn about where the beans come from, how they are roasted, and experience unique offerings and different techniques such as cold brew, pour-over and so on.
The category has evolved in traditional outlets, as well. The wildly successful innovation of single-serve pod capsules has developed the coffee category significantly (about 31 percent in the last four years). In the retail segment, pods now account for 40 percent of the $9.3 billion coffee category.
The convenience of making a single high-quality cup of coffee, with significant variety to choose from, certainly resonates with today’s consumers. We are also witnessing a ‘premiumisation’ within the category, as consumers trade up to higher-quality, more expensive coffee offerings.
Eight O’Clock has just launched Infusions — coffee blends with a twist. What is the thought behind this move?
Coffee is an important part of many consumers’ lives. Additionally, health and wellness, and functional benefits, continue to play a crucial role, especially with beverages. From the insights garnered, we developed great tasting coffees that provide added value to consumers. We like to say that the Infusions line is coffee with intention, and you should expect more out of your coffee. While Alert and Relax were the first two Infusions, we are getting ready to launch three more to round out the line.
Health beverages seem to be all the rage in the industry. How has this trend influenced Eight O’Clock’s strategy?
Health and wellness continues to be a mega trend in the US and around the world. We believe it is an underdeveloped area within the coffee category, and this was a key driver in the launch of our Infusion coffees.
With the growing popularity of tea globally, is there anything for Eight O’Clock to be worried about?
We believe tea and coffee co-exist very nicely as each offers advantages to the consumer, whether it is to support a specific need state or time of day. The total consumption of liquids may not increase overall but coffee and tea continue to have an opportunity to steal share from other beverages, especially carbonated soft drinks and energy drinks.
Your coffees are sourced from South America and Africa. Is India on the radar for sourcing, too? What’s the significance of a ‘microlot’ from Tata Coffee being selected for the Starbucks Reserve Roastery?
While the American consumer does not currently associate coffee with India, we always keep it on our radar due to our relationship with Tata Coffee. Single-origin coffees and traceability are emerging trends with the consumer. As Starbucks is using a microlot from Tata Coffee, perhaps this will trigger more consumer interest and intrigue about Indian coffees and generate enough interest for us to evaluate a launch opportunity.
Could you give us highlights of Eight O’Clock’s marketing plans and ongoing projects? What roles do advertising, social media and activation play in this area?
Eight O’Clock wants to continually reinforce that we are a premium player in home coffee without the premium price. At the same time, we want the consumer to see Eight O’Clock as a brand that is looking towards the future. I think the launch of Infusions and 100% Brazilian Breakfast are good examples here.
We use a number of marketing tools to deliver this message at multiple consumer interaction points. This year, we are focusing on our new items to generate excitement and news about the brand. We are activating the brand by using four key pillars: advertising, sampling, in-store tactics and couponing. Advertising includes digital, social, radio and outdoor. Sampling is headlined by a 10-city sampling tour via a mobile Eight O’Clock Infusions truck.
What are the principal challenges that the Eight O’Clock brand faces — and is likely to contend with in the coming years — on the marketing front?
Eight O’Clock faces two key challenges on the marketing front. One is to drive awareness, consideration and trial among younger users who are exposed to competitive brands through their out-of-home presence. Eight O’Clock’s lack of store fronts makes it more difficult to engage the younger consumer when they transition to coffee.
The other key challenge is share of voice. Our marketing spend is low compared with others in the category, so our dollars have to work very hard for us. In such a competitive category, with high switching, it is important to maximise our efforts to enhance activation and engagement.
Whole bean, ground, single serves and now, infusions — how do these four categories work for Eight O’Clock from a marketing perspective?
With the variety that Eight O’Clock offers, we appeal to many more consumers than we did in the past. Our household penetration has doubled in the last five years, and entering the single-cup segment has driven a lot of this growth. The increased penetration allows our marketing message to reach more people and to be more effective. As always, we continue to deliver great coffee, regardless of form or format, at a fair price.
This article was first published in the January - March 2017 issue of Tata Review. Read the ebook here