Green Mountain Coffee Roasters, Inc.
Green Mountain Coffee Roasters currently has a revenue growth rate of 35.5% over the last 5 years. This company is growing right along side the fastest growing portion of the of the coffee industry, the high-end specialty coffee market. Green Mountain is a product leader in this category, they emphasize quality and enjoyment of their product.
Green Mountain’s target market is no question wholesaler’s. Green Mountain has over 5,000 wholesale accounts that currently account for 94% of their revenue.
In this marketing plan I thoroughly go through who their wholesale customers are, the relationships they have with them, and how they plan to use them in their overall strategy to obtain more customers in different market segments.
Also in this report, I discuss the competitiveness of the industry Green Mountain is in, as well as the opportunities, threats and other outside influences that can have a positive or negative effect on the company.
In general this report is an overview of the company that is Green Mountain Coffee Roasters, their industry, target markets, environmental influence’s, competition, and most importantly their strategy, along with my critique.
Green Mountain Coffee Roasters began in 1981 as a small café in rural Vermont. Today the company boasts a 90,000 square feet, state-of-the-art distribution & roasting facility in Waterbury, Vermont, where the company is based. Green Mountain Coffee Roasters has a strong regional presence in the Northeast and is gaining Market share in other parts of the country. It has an extensive wholesale operation as well as a direct mail and Internet businesses.
Green Mountain Coffee, Inc. is a leader in the specialty coffee industry. The company roasts 60 varieties of high quality Arabica coffees including single-origin, estate, certified organic proprietary blends and flavored coffee’s that it sells all under the Green Mountain Coffee Roasters name brand. The majority of their revenue comes from their aforementioned wholesale operation, which services restaurant, supermarket, specialty food store, convenience store, food service, hotel room hospitality, university, airline, train and coffee office service customers. The company went public in 1993 and is listed on the NASDAQ National Market under the symbol GMCR; for the Fiscal year ended September 25th, 1999, net sales increased 16.2% to a record $64,881,000.
The coffee industry has shifted towards specialty coffees such as Green Mountain’s in the recent years, and The Company competes against all sellers of specialty coffee. These specialty coffees are higher priced then “normal” coffees; the increased demand for them has been driven by consumer education, a wider availability of high quality coffee such as Green Mountain’s, and an emergence of up scale coffee shops throughout the country.
According to the National Coffee Association of USA, Inc. four out of five American consumers consider themselves coffee drinkers; on average an estimated 400 million cups of coffee are consumed in the US each day. Next to oil, coffee is the highest traded commodity in the world.
Specialty coffees are becoming increasingly popular in the US, and the fastest growing segment of the coffee market. Green Mountain Coffee has become an established and premier brand in the specialty coffee market. This market is highly competitive, and because of the high growth of this segment, large companies have entered the market. Proctor & Gamble distributes Millstone into supermarkets, which is a direct substitute for Green Mountain Coffee; Starbucks recently signed a distribution agreement with Phillip Morris/ Kraft foods that will enable Starbucks to place its Coffee in supermarkets as well. Starbucks has also been growing in its wholesale operations, and hopes to leverage its brand name that is continually growing in equity do its popular neighborhood coffee houses and trendy style. In the office coffee, convenience store and service arena, General Food’s, Proctor & Gamble, and Sara Lee are direct competitors. In the direct sales area of the market, which accounted for 6% of Green Mountain’s revenue in 1998, their major competitor is a division of General Foods, Gevalia.
As you can see there are a lot of large multinational corporations in the market that have resources available to them that Green Mountain does not have. Starbucks is the only other major independent producer of high-end coffees. As this new market expands and smaller companies strive to build brand awareness and larger companies attempt to earn larger market shares and build brand equity, competition will only intensify.
Environmental Factors influencing Green Mountain Coffee Inc.
What we will look at in this section is the major Social and Economic factors that are influencing Green Mountain Coffee and whether or not these factors can be looked at as opportunity or a threat to Green Mountain.
Social ? Major social trends include a movement toward more “natural” and healthy products, as well as lifestyles. This trend can only help Green Mountain. With its Organic line of five different coffee flavors having been introduced on Earth Day, 1998 and available along side all its normal line, Green Mountain is aggressively pursuing this new market.
? Another social trend is that of America becoming more
concerned with the environment. Green Mountain works
closely with Conservation International, and the Rainforest
Alliance. In 1998 the company was invited to present a Environmental case study at the Future 500 annual conference on its biodegradable coffee bag that it developed in partnership with 3M corporation. The Company has also sponsored a Yale research project to find more environmental and labor healthy ways of producing Coffee. The study perpetuates Green Mountains continuing efforts to develop long-term relationships with its coffee-producing partners. It also continues Green Mountains overall support for positive environmental and social initiatives, such as their Stewardship line of coffee that come only from farms that exhibit extraordinary care of their land and their employees. The environment is an issue that
Green Mountain takes very seriously and its many different environmental projects can only strengthen the company in the mind of the consumer.
Economic ? The extraordinary economic boom that is currently happening
in America has caused a substantial increase in per capita
income and the standard of living. Green Mountain Coffee is a high-end product that is pricier than normal coffee’s on the market, The overall economic prosperity of the country gives consumers greater disposable income and a higher propensity
to buy higher priced consumer goods such as Green Mountains.
? The extraordinary growth of e-commerce has in most cases
forced companies to either develop an effective e-commerce
solution. This new use of technology can be looked upon certainly as an opportunity or a threat depending on the success of Green Mountain in this area. They recently opened a web site that offers a variety of information on the company and secure online purchasing of Green Mountains products. Initial reactions have been positive, as they have been proven to be an effective channel for the obtainment of new direct-mail customers. This new area of commerce is looking more like an effective medium to sell and provide information to consumers than a possible threat.
Influences ? Green mountain uses a combination of outside brokers and
And direct relationships with estates for its supply of green coffees, with outside brokers providing the majority. The price of coffee is subject to high volatility. The company generally passes coffee price increases or decreases on to the customer, which means if the price of green the green coffee bean increases, or world supply of the green coffee bean decreases, the price is raised and sales could diminish. Another outside influence that could have an adverse affect on Green Mountain’s operations is the acquisition of Mobil by Exxon Corporation. Mobil, a wholesale account, accounted for 14,4% of sales for fiscal 1998.
The market segment that Green Mountain focuses on is the wholesale market. In 1998, ’97, and ’96 this market accounted for 94%, 93%, and 91%, respectively, of total sales. Green Mountain’s wholesale operation services a wide variety of establishments, primarily in the northeastern United States. Green Mountain’s wholesale customers resell the coffee in whole bean or ground form for home consumption and/or brew and sell coffee beverages at their place of business.
Notable wholesale customer accounts include:
Hannaford Brothers – 120 stores Aureole Restaurant, NYC
Shaw’s -100 storesThe Harvard Club, NYC
Stop & Shop – 150 storesNew England Culinary Institute
Roche Brothers – 13 storesCulinary Institute of America
Office Coffee ServicesConvenience Stores
Perrier’s Poland SpringsMobil Convenience Stores
Vermont Pure SpringsOrlosoki Quik Marts
Other Food ServicesOther Retail
Amtrak – northeast corridorL.L. Bean
The Distribution of Wholesale Coffee Pounds Sold During Fiscal 1998 by Wholesale Customer Category
Through the Wholesale operation, Green Mountain has started an international sales effort, principally through it’s various distributors, and targeting nations where there exists either a tradition of coffee consumption or a recent trend indicating a market for specialty coffee like Green Mountain’s.
The actual management of the wholesale operation is done from Green Mountain’s headquarters in Waterbury, VT. The distribution facilities are located in Biddford, Maine, Latham, New York, Wodburn, Mass., and Southington Connecticut. The facilities are located within a two-hour radius of most customers and where they aren’t Green Mountain uses Fed-Ex or the United States Postal Service.
The Company’s Wholesale Coffee Pound Sales in Fiscal 1998 by Geographic Region
The company generally provides its wholesale customers with brewing, grinding and related product displays at no extra charge. Green Mountain personnel or a contracted service usually installs this equipment where the customer prefers at no extra charge. In addition, each customer is assigned a service technician who service repairs and provides emergency service on such equipment. For supermarket customers, teams of stockers keeps displays clean, appropriately cleaned, and have promotional items to maximize sales.
Hannaford Brothers Company, a supermarket chain, accounted for approximately 9.9% of Green Mountain’s 1998 sales; the contract with Hannaford Bros. runs through 2000 and gives Green Mountain distribution in over 120 stores. Mobil “On the run” convenience stores accounted for approximately 14.4% of Green Mountain’s sales for fiscal 1998. Mobil gives Green Mountain a distribution channel of over1,100 stores throughout the country. In august of 1998, Convenience Store magazine awarded its “Best Coffee Presentation” concept award to Mobil for its display’s featuring Green Mountain.
Two other supermarket that chain’s that are helping establish Green Mountain as the leader in supermarket specialty coffee in the Northeast is Shaw’s and Stop & Shop. In spring of 1998, Shaw’s increased the distribution of Green Mountain to over one hundred stores. Stop & Shop gives Green Mountain a full display in the bakery section in over 150 stores.
American Skiing Company is another large wholesale customer of Green Mountains. They have nine alpine ski resorts that all distribute Green Mountain Coffee. Resorts include Sugarloaf/USA and Sunday River in Maine; Attitash Bear peak in New Hampshire; Killington, Mount Snow, and Sugarbush in Vermont; Steamboat in Colorado; Heavenly in California/Nevada; and The Canyons in Park City, Utah.
1998 was the first year of a five-year agreement with Poland Spring, a subsidiary of The Perrier Group of America. The agreement made Poland Springs Green Mountain’s third largest customer behind Mobil and Hannaford Bros., respectively. Poland Spring has agreed to put large Green Mountain pictorial ads on the back of 200 of its trucks. More mutual marketing ventures such as this are expected to arise from the two companies continued relationship.
Green Mountain publishes catalogs that offer their complete product line as well as coffee-related gifts and accessories. Sales from direct mail accounted for 6%, 7%, and 9% in fiscal 1998, 1997, and 1996, respectively. Approximately 37% of this revenue was generated by something Green Mountain labels its “Coffee Club”. This is a program that has “customized standing orders” for re-shipment with over 4,000 consumers. 42% of direct mail sales came from other non-“Coffee Club” consumers through the catalog. Another 19% of direct mail sales came from business to business sales such as to bed and breakfasts, offices and small retail establishments. As the secure on line purchasing that Green Mountains new web site offers begins to grow, direct mail should start to contribute more to total sales, as e commerce offers any-time, user friendly access to purchasing Green Mountains products.
Total Coffee Pounds Sold in 1998 by Category
V. Description of the key elements of Green Mountain’s strategy
The presence of Green Mountain Coffee crosses over many different distribution channels and customer categories in its primary geographic market, the northeastern United States. What this does for Green Mountain is provide widespread brand exposure in a variety of settings, ease of access to Green Mountain’s products, and many opportunities to sample their products. Throughout the day a consumer can consume the product: at home in the morning, at the office, at a restaurant for lunch, on an airplane or train to a destination, at convenience stores or a supermarket, and even at a movie theater.
Green Mountain believes that it’s coffee’s convenient availability throughout the day for consumer trial is a significant competitive advantage and a key component of their strategy. Consumers who sample their coffee by the cup are likely to develop a taste for Green Mountain Coffee and seek it out through other available distribution channels. Company studies have shown that consumer trial at one level of distribution will lead to subsequent purchases in another area of distribution.
As brand awareness increases through trial by consumers of Green Mountain’s coffee by the cup, demand for whole bean sales of Green Mountain’s coffee for home consumption will also increase. According to the National Coffee Association of America, 76% of coffee is drank at home, and 72% of that is bought from a supermarket. As Green Mountain’s brand equity is built, they believe wholesale expansion will typically continue through customers such as supermarkets, convenience stores and specialty food stores, who in turn sell Green Mountains whole bean to customers. Green Mountain sees this expansion process as capitalizing on the “cup/whole bean inter-relationship”. This relationship is designed to increase Green Mountain’s geographic share in already strong areas, increase “sales density” in those areas and according to Robert Stiller, CEO: “drive operational and brand-equity efficiencies”.
By principally leveraging the companies strong wholesale distribution channel, Green Mountain wants to introduce its products in selected markets across the US and internationally.
Green Mountains target market is still going to be wholesalers, and for them to grow an integral part of their growth strategy will be increasing sales to retailers who sell whole bean coffee. They will try to identify new customers such as chain and franchise convenient stores and office coffee services, i.e. the same type of wholesalers they have now, and use these customers for not only additional revenue, but enhance the consumer trial of their product. Green Mountain feels that their core competency is the extremely high quality and convenience of their product. This is something Green Mountain believes the customer can recognize, and that Green Mountain has been and will market in the future.
VI. Critique of Strategy recommendations for changes
There is no doubt that Green Mountain is a product leadership type of company. It seems they really pride themselves on the product they produce as being the best in the industry. They project this in their ideas about their wholesale customers. They can use these whole bean buying customers to give consumer trials to people throughout the day which they think, because their product is so good, will lead to these customers developing a taste for their product and purchasing it a t a supermarket where the most coffee is consumed. With the limited business knowledge that I have, I was very impressed with Green Mountain and their overall strategy. They seem to be hyper-focused on something that they are very good at; developing relationships with wholesale customers. Green Mountain sees their relationships with these customers as their avenue into other markets, which I think is a positive strategy.
With the limited business knowledge that I have, I was very impressed with Green Mountain and this strategy. They seem to be hyper-focused on something that they are very good at; developing relationships with wholesale customers and then using these relationships to enter gain brand awareness, as well as brand equity.
There is an obvious problem with having customers that have large accounts that provide such a large portion of revenue, what happens if you lose the account? This happened to Green Mountain in 1998, The Coffee Station that ordered 107,000 pounds annually, dropped Green Mountain.
In order to protect themselves Green Mountain needs to do a few things. First they need to keep going after new wholesale customers and work on retaining the ones they already have relationships with. They can achieve the latter through long-term contracts and mutual marketing efforts like the one they have with Poland Spring. Delight their wholesale customers with great service [such as their display maintenance and VIP automatic re-ordering campaign (with direct mail customers)], and a great product.
Third, Green Mountain must develop different types of customers through such distribution channels as direct mail/e commerce. They have to diversify themselves in order to be able to absorb a revenue hit if for instance they lost their Mobil account. The web is a great way to do this. Maybe they could bring in one of those interim CEO’s like they’re doing in silicone valley; to work with/consult, or run their web division.
There is little question that they are basically confined to the Northeastern area of the US. They have a very dominant market share in that area , and if they can somehow leverage that market share and expand into other markets they could really grow. The US and Europe are wide open to them right now.
Green Mountain has a great strategy of using their target market to enter other markets, and if they can start diversifying themselves and gaining that ever-important brand awareness as well as customer trial, I think their product leadership will allow them to grow. It really is a great cup of coffee.
Cite this Marketing Plan Green Mountain Coffee Roasters
Marketing Plan Green Mountain Coffee Roasters. (2018, Jun 13). Retrieved from https://graduateway.com/marketing-plan-green-mountain-coffee-roasters/