Frozen White Castle burgers and Friendly’s Ice Cream are there. Subway is there, too. These are just a few of the restaurants in the U.S. that are getting into the game of selling their food in grocery stores. Caribou Coffee recently announced that it was expanding its current partnership with Hy-Vee to become the supermarket chain’s “preferred coffee.” I talked to Hank Suerth, senior vice president of commercial business at Caribou Coffee, to find out what goes into making a foodservice brand a success outside of its own store.
When did Caribou become more than just a coffeehouse and start branching out into other areas, such as selling packaged coffee and setting up Caribou kiosks in the grocery store? How did that come about?
We recognized in 2002, after extensive market research, that there was a significant opportunity in different channels with our prepackaged coffee and with our office coffee business products, so we focused on extending our brand in the grocery and club channel and, to a lesser degree, foodservice.
In addition, in 2002, we had the opportunity to partner with another Minneapolis-based company, Byerly’s, to test the impact of the Caribou Coffee brand and our brewed and espresso based beverage coffee offerings in their very high-end grocery stores. Sharing the same geographic market and having the same high-quality market position gave us an excellent opportunity to test the concept.
By 2005 it was apparent that offering Caribou products in grocery venues was mutually beneficial for both us and our grocery partners. Not only did sales and profits increase triggered by the coffee beverage sales, but the “basket ring” (dollars spent by consumers on their trip to the store) on average also increased.
We continue to expand in other commercial channels as we look to broaden Caribou Coffee from a retail coffeehouse business to a branded specialty coffee company providing customers access to our products across multiple channels — grocery, licensed and franchise units in many targeted markets. These markets include colleges and universities, health care, restaurants, corporate office dining, sports venues, etc. At the same time, we have not forgotten that the heart and soul of our brand is rooted in our coffeehouses.
Through all these channels there is a 100% commitment to the hand-crafted quality of our products, providing a consistent brand experience to our consumers and to sustainability through our partnership with Rainforest Alliance.
How can foodservice operators successfully extend their brand outside of their own locations? What factors play a role in getting started and keeping up the momentum?
Consumers give their permission and acceptance for a brand to expand outside of its original space, in our case the retail coffeehouse. Some expansions “fit” and others do not. Your customers will tell you very directly with their patronage if they do or do not. Brand name and product quality are integral to the success of this transition. Can your brand and product(s) extend beyond your current boundaries and will the product still resonate with consumers in the new environment? Do the research up front and be prepared to have the resources required to sustain the program through its early stages.
The underpinning of consumer acceptance is providing a quality product experience consistent with the brand’s positioning.
Does the sale of products and services in supermarkets affect the traditional business?
Yes and the effects are positive. As our brand awareness and visibility has grown, we have seen a positive impact across all of our business units. The investment in time and resources must be made in order to create a consistent consumer experience from one channel to another. We have done it in the grocery channel and it is paying off!
What advice would you give to restaurants, such as California Pizza Kitchen or Boston Market, who have already crossed over into selling goods outside of their own retail locations?
Do the hard research up front, have the resources and willingness to work through the initial periods of transition, do not get complacent if early success is experienced, and always look to innovate to keep your concept fresh and attractive to your customer.
What do you think about restaurants selling their food in the supermarket? Leave a comment.
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Image credit, RapidEye via iStock Photo