CASE STUDIES

Folgers and Maxwell House case

study
Expanding coffee into multiple lifestyle occasions
Reference Code: CSCM0142
Publication Date: October 2007

DATAMONITOR VIEW
CATALYST
Procter & Gamble and Kraft have been developing their traditional coffee brands (Folgers and Maxwell House respectively) to
appeal to a new type of consumer, adding premium elements for a younger age range with more demanding taste. However,
the brands are still keen to hold onto their core, older customer bases, developing products designed especially for their
needs, while retaining their brands' low price points. Premium coffee manufacturers may have cause to be wary, as these
brands try and steal their customers with lower priced everyday premium blends, while offering senior targeted elements that
premium coffees do not supply.

SUMMARY

Folgers has recently introduced the Simply Smooth range of stomach friendly coffee, while Maxwell House has
launched a new easy open lid for its instant varieties. These both address the health needs of more senior
consumers traditional coffee's core customer base.

Folgers and Maxwell House are attempting to attract new consumers with the launch of more premium blends,
which retain low price point to promote everyday consumption. Folgers has launched a Gourmet Selection
variety, while Maxwell House has improved the flavor of its core products. In addition, they have both launched
a range of coffee pods, latching on to a premium coffee trend, whilst being low in price.

Both companies promote coffee as a lifestyle product through their websites, providing recipes and
entertaining tips to encourage the use of coffee in more occasions. In addition the Folgers Club and Maxwell
House points system encourage brand loyalty.

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ANALYSIS
Introduction
Low priced brands go 'premium' to attract a larger customer base
Lower priced coffee brands such as Folgers and Maxwell House have increasingly been threatened by the rise in the
premium trend in coffee, with consumers willing to spend more on products claiming to be better quality. This has led them
to expand their brands away from instant coffee, to offer an increasingly varied selection of roast, ground and pod varieties,
in order to keep up with current coffee developments.
The need to expand their coffee varieties is reflected in the relatively small size of the US instant coffee market; it was
worth only a fraction of the roast and ground coffee market in 2006 $833 million, compared to $5.6 billion and had
recorded an annual fall in growth of -0.7% in the 2001-2006 period.
Despite increasingly moving into premium coffee territory, Folgers and Maxwell House have, however, retained their lower
price points, a factor which could threaten other coffee makers who provide premium blends at a higher prices. This case
study focuses on how Procter & Gamble and Kraft are developing their traditional coffee ranges (Folgers and Maxwell
House respectively) to appeal to their core consumer bases, while attracting new, and often younger, customers to their
brands with more premium offerings.

Targeting existing consumers with products designed for the older generation
Drinkers of traditional, non-premium coffee tend to be older consumers who have not latched on to the premium trend,
preferring to stay with the same everyday coffee varieties that they have drunk for years. However, with the growth of
senior consumers growing fast in the US, traditional coffee manufacturers such as Folgers and Maxwell House are
becoming more aware of the growing importance of these consumers, and so have increasingly introduced products that
appeal specifically to more senior age groups. These are not designed to premiumize the brand, but to appeal to the health
concerns of seniors, an aspect that premium brands have not fully exploited.

Folgers stomach friendly coffee targets health needs of more mature consumers
Procter & Gamble introduced a new Folgers variety in 2006, targeted at consumers who don't drink a lot of coffee because
the high acid content causes them stomach problems. This was released with its core consumer base in mind, as the
condition is likely to affect a high percentage of seniors, who generally have more sensitive stomachs.
Simply Smooth is a ground coffee that is said to be roasted in such a way that it reduces certain irritants that may effect a
sensitive stomach. Although a handful of companies have released stomach friendly coffees in the US, such as the Imus
Brothers' Stomach Friendly Coffee, this is the first time a major brand has entered the market. As such the brand is trying to
distinguish itself with a type of coffee premium brands have neglected to offer.

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Maxwell House's easy open instant coffee lid appeals to older customer requirements
Also targeting older consumers with new offerings is Kraft's Maxwell House brand, which is now offering its instant range
with an easier-to-open EZ Grip lid. The lid is designed for the elderly, or those suffering from arthritis, who may find it
difficult to open and close coffee jars easily, and is approved by the Arthritis Foundation's Ease-of-Use Program, giving it
added status.
By developing this new lid, the company acknowledges that those who purchase its instant range are mainly older
consumers, who could therefore appreciate this packaging aid. The company stresses that the coffee inside the new
packaging remains the same as before, an important aspect for consumers who may have bought the same brand for
years, with no wish to trade up.

Figure 1:

P&G's Simply Smooth and Kraft's Maxwell House brands

Both Folgers Simply Smooth

and Maxwell Houses EZ
Grip lid target the needs of
senior consumers

Source: Datamonitor

DATAMONITOR

Attracting a new generation of consumers with premium products

Folgers' Gourmet Selections brings a staid brand up to date
Procter & Gamble has attempted to attract new consumers to the Folgers brand by introducing a premium ground coffee
range called Folgers Gourmet Selection. However, instead of competing directly with premium coffee makers, the company
promotes the new range as an everyday premium blend, or a ''gourmet-inspired coffee that could be consumed on an
everyday basis,'' as Gennifer Hobbs, a management supervisor at Saatchi & Saatchi who worked on the Folgers account,
termed it.
The company is promoting the new brand through a $20 million advertising budget, which highlights its message of
everyday premium. This includes a TV advert of a woman dreamily drinking coffee in her kitchen until a toddler interupts
her reverie, implying that her everyday home coffee is of a dreamy quality not usually found in traditional coffee brands.
Folgers' move to a more premium quality brand has been viewed as an essential progression if the brand is to stay relevant
with consumers. Lucian James, the president of Agenda, a branding agency in San Francisco, stated: ''A gourmet version

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of coffee is the new standard. I can't imagine a coffee that doesn't do a gourmet line being relevant. Everybody's
expectations for coffee have gone up,'' (New York Times, August 2006).
The Folgers Gourmet Selection brand is competitively priced when compared to more premium brands, a factor which
could help it in its mission to attract more consumers to the brand. A 10ounce bag of Folgers Gourmet Selections retails for
$5.99, which contrasts with an 8.8 ounce bag of Kona coffee at Satrbucks which sells for $15.99.

Maxwell House coffees are updated to provide a richer taste

In 2004 Kraft changed the makeup of two Maxwell House variants Original and French Roast roasting the beans for
longer to produce a richer tasting coffee. The new coffee blends conformed to changing consumer demands for a more
intense flavored coffee, acknowledging that the majority of consumers desired a more premium beverage for everyday
consumption than it currently offered.
Coffee drinkers tastes are changing, and so are we. We have enhanced our established recipes so that the new blends
are even better-tasting. They were created with the same high standards that Maxwell House has had since1892 and
deliver on consumers evolving tastes, Tracy Roe Haffner, Senior Category Business Director, Maxwell House.
Other elements of Maxwell House coffee have also been updated to appeal to changing consumer tastes for a more
premium everyday coffee. The company's instant coffee, which features the EZ Grip top, contains the Fresh SealT valve, a
one-way valve that is designed to improve the freshness of the product. This allows excess gasses from freshly ground
coffee to escape from the can, while sealing out air/oxygen, which can cause the coffee to go stale. In addition, the
company has put an antioxidant stamp on its Original Maxwell House and Master Blend varieties, promoting a popular
health claim that high amounts of antioxidants are found in coffee.

Marketing low priced coffee pods for in-house and external machines has had varied
success
Another premium brand trend has been adapted by Folgers and Maxwell House that of ground coffee pods. Folgers has
developed its range of pods to be compatible with Procter & Gamble's Home Caf single serve brewing system, while the
Maxwell House pod range is marketed as being compatible with a range of machines.

Folgers pods are promoted in conjunction with P&G Home Caf machines, which have performed
less well than expected
Folgers Home Caf pods come in a range of flavors, such as French Vanilla, Hazelnut and 100% Colombian, and in two
types Classic and Creamy. Whilst the flavor selections imply a more premium image, the range is perhaps not having as
much impact as it could due to the fact that it is promoted in conjunction with one machine, that of P&G's Home Caf
system.
The Home Caf range has had mixed reviews about its quality, leading critics to conclude that its low price point positioning
is not a positive selling point. According to the Home Caf website, the company has discontinued the sale of two of the
machines in the range, the Black & Decker HCC100 and the Mr Coffee AT13. Singleservecoffee.com, which tracks and
reviews new single-serve coffee machines, stated that the HCC100 system was plagued with issues regarding not being

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able to open, bad pumps, and a plastic taste to the coffee. There was even several issues regarding the system simply
melting from the brewing process. Before its withdrawal, the HCC100 was discounted to $29.99 from its list price of
$69.99, highlighting how keen the company was to encourage sales of the machine.
The Mr Coffee AT13 model had generally good reviews, although coffeereview.com said that the machine had over
sensitive control buttons, which made getting the desired brew difficult. Despite having two new machines in production to
replace these models, the Black & Decker GT300 and the Krups KP1010, bad reviews of the other two may have tarnished
the Home Caf brand, and therefore impact Folgers' coffee pod sales.

Maxwell House Caf Collection pods are compatible with various machines, exploiting a growing
coffee trend
Unlike Folgers pods, Maxwell House Cafe Collection pods are designed to be compatible with a range of single serve
machines, including Home Caf and Senseo, thereby increasing consumer choice. The range comes in fewer flavors than
Folgers pods (House Blend, Decaf, French Roast and Hazelnut), but retails at a similar price; an 18-pod bag retails at
$3.99, compared to $4.99 for an 18-pod Folgers' pack. A key selling point is the pod packaging which features TasteLock
package designed to seal in freshness.
In contrast to P&G's pods, the Maxwell House coffee pods are not marketed to be compatible with Kraft's proprietary single
serve machine, the Tassimo, which only takes T-Discs, Kraft's range of liquid coffee filled single beverage capsules. At
around $155, the Tassimo is perhaps marketed towards consumers who desire a more premium range of coffee than the
Maxwell House brand, and therefore the machine has its own range of upmarket pods.

Marketing coffee as a lifestyle product, using multiple points of contact

Both the websites of Folgers and Maxwell House are designed to promote the companies' coffee offerings as lifestyle
products, marketing coffee as an aid for entertaining, and for its wide ranging use as an ingredient in food recipes. This
takes the brands beyond coffee's beverage function, expanding the number of coffee uses into numerous eating and
drinking occasions.

The recipe webpages are designed to broaden coffee's appeal to include non-drinking occasions

The Folgers recipe webpage includes recipes for using Folgers' coffee, covering three topics: Drink, Breakfast
and Dessert Recipes. It also includes tips for cooking with Folgers coffee, such as a measurement helper to help
users get the right strength in their cooking. Such tips promote the brand as being customer friendly.

The Maxwell House recipe webpage has a similar format, with recipes divided in to sections on Hot Java Drinks,
Chilled Coffee Drinks, Decadent Desserts and Popular Pairings (a range of non-coffee flavored desserts said to
go well with coffee). Stating that coffee is "Too good to be limited to mornings alone", the recipe page helps
promote the brand as an all day staple, not just for morning use. An addition entertainment page advises on how
to entertain at home, promoting coffee as a key ingredient to an evening's success.

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Folgers' Club Membership and Maxwell House Points plan encourage brand loyalty

Folgers has a members' club called the Wakin' Up Club which consumers can join to obtain emailed newsletters,
special offers, receive free samples and hear about Folgers' news. This is designed to encourage brand loyalty,
keeping Folgers in the mind of consumers.

Maxwell House encourages brand loyalty through the Maxwell House Points, which are numbered tokens
featuring on Maxwell House coffee packagings. These tokens can be exchanged for rewards; 480 points gets a
coffee maker, while 150 points buys a picture frame.

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APPENDIX
Case study series
This report forms part of Datamonitor's case studies series, which explores business practices across a variety of
disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and
insurance, pharmaceuticals and software.
Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations,
highlighting the ways in which the company has become one of the best in its field or how it deals with different problems
encountered within that sector.

Methodology
A variety of primary and secondary research was carried out for this case study. This included researching the coffee
market on Datamonitor's Interactive Consumer Database and on the Productscan Online Database of new products,
alongside an extensive review of secondary literature and other in-house sources of information.

Further reading
Capitalizing on New Breakfast, Lunch and Dinner Consumption Patterns (Datamonitor, DMCM2404, September 2006)
Profiting from Changing Snacking and Beverage Occasions (Datamonitor, DMCM2979, August 2006)
New Opportunities In Out-of Home Food and Drinks Consumption (Datamonitor, DMCM2406, March 2006)

Ask the analyst

The Consumer Knowledge Center Writing team

askcm@datamonitor.com

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