A Timbit of Trouble

570 News in Toronto reports that Tim Horton’s franchise owners have launched a near $2-billion lawsuit claiming lost profits since the iconic Canadian company switched from fresh-baked to frozen donuts. The $1.95-billion suit is scheduled to go to court in November and it has even divided franchisees, as a large group of store owners is trying to stop a smaller group from following through on the lawsuit.

“It really plays out as a battle between those ‘old school’ guys who were loyal to the Ron Joyce era and Ron Joyce himself against some of the newer store owners who have come in under the new guard in the last 10 or 15 years,” explains Michael Friscolanti, senior writer for Maclean’s, where the story appears this week.

Joyce, a co-founder of the Tim Horton’s chain, revealed in 2003 that the company had stopped baking donuts on-site and had instead turned to the “par-bake” method where a donut was 95 per cent prepared, flash frozen, and then later re-heated for sale.

At the root of the lawsuit is the cost of these new donuts. The plaintiffs in the case allege the company told them it would cost no more than 12 cents per donut, while the true cost today (according to Tim’s) is 17.9 cents. One franchise owner claims that increase cost him as much as $57,000 in profits at one store.

“What you have here is this classic case of a few disgruntled franchisees who are saying we’ve lost some money (and) Horton’s needs to pay us back some of this money that we’ve lost,” Friscolanti tells 570′s Gary Doyle Show. “And at the same time you have a much larger group of franchise owners who have come forward to say ‘no, no’ no, that’s totally wrong, we’re doing very well.’ ”

Friscolanti says the concern of the franchise owners opposed to the lawsuit is that trade secrets and their bottom line will become public fodder, making them appear greedy. There is also concern over negative media coverage of the iconic restaurant chain.

One of the franchise owners opposed to the lawsuit is Graham Oliver, who owns five Tim’s stores in Kitchener. In an affidavit obtained by Maclean’s, Oliver writes “I do not agree with many of the material allegations and claims advanced by the plaintiffs. In fact, they are patently wrong and cannot be supported. Negative publicity has the potential of tainting the public image of the Tim Horton’s brand, which is vital to our business.”

To read Friscolanti’s full story in Maclean’s, click HERE.

A Cup Good to the Last Drop-off

Jenn Abelson reports in the Boston Globe that Coffee rivals join forces in quest for perfect green container. For more than four years, Hellyar, supply chain manager for Dunkin’ Donuts, has hunted for an alternative to the much maligned Styrofoam cup — long enough to earn him the nickname “Joey Cups.’’ The ideal container would have to be recyclable or compostable, keep coffee hot, and not cost franchisees too much.

It might as well be the Holy Grail. Neither Joey Cups and his team of 12, nor anyone else in the industry, has been able to find it.

So now they have decided to join forces. For the first time, Dunkin’, Starbucks, and Tim Hortons are working together to conquer the sustainable container. On Earth Day this April, the competitors convened with cup manufacturers, waste haulers, and municipal officials at a cup summit held at MIT. Since then, they have been sharing prototypes of innovative designs, researching ways to make it financially worthwhile for communities to recycle used coffee cups, and designing a pilot program for a waste-free zone at Faneuil Hall Marketplace where everything would be recycled or composted.

“We are fiercely competitive but we really want to differentiate ourselves on the quality of our product and level of service in stores,’’ said Jim Hanna, director of environmental impact at Starbucks, which hosted the cup summit. “Sustainability is a problem we all have to solve together.’’

Many consumers (and even some coffee executives new to the struggle) think there is an easy answer: switch to paper. But it’s not that simple. It takes roughly 20 million trees and 12 billion gallons of water to manufacture the 58 billion paper cups that end up in the trash every year. Most communities do not have the means or equipment needed to recycle these cups, which involves separating the paper container from the wax-like inner lining that prevents your java from leaking out.

Even the compostable cups of Green Mountain Coffee, known as ecotainers, fall short of perfection because they can only be composted at a few commercial facilities, not in backyard composters.

There are also limitations on materials used to create environmentally friendly cups. The US Food and Drug Administration restricts how much post-consumer recycled fiber can be used in products that come in contact with food. Other cutting-edge containers can’t be readily manufactured in the amounts needed by coffee chains, or they fail to meet performance standards.

One time, Hellyar brought some new cups made of eco-friendly materials to Dunkin’s quality assurance lab to test them out. He poured a fresh hot brew in them and returned to his desk. A few minutes later, a research and development worker came running after him, cursing that two dozen coffee cups were leaking all over the lab.

Read more at: Boston Globe

Coffee Prices Bite Businesses, Public

Lisa van der Pool reports in the Boston Business Journal that he price of coffee is continuing to rise. Wholesale coffee prices are the highest they’ve been in 13 years.

Futures contracts for December 2010 delivery have risen each of the last few days and a fungus in Colombia is threatening to hit the country’s coffee output, according to a Bloomberg News reports.

Leaving managers of many Boston-area coffee shops to ponder whether to pass on those costs to customers.

The J.M. Smucker Co., which licenses Dunkin’ Donuts coffee for sale in retail stores, has already announced it will raise prices by four percent.

But whether local Dunkin’ Donuts shops hike coffee prices is up the each franchisee, according to the Canton donut and coffee chain.

“Dunkin’ Donuts restaurants are independently owned and operated by franchisees who are responsible for making their own pricing decisions.

“While we are aware of J.M. Smucker Company’s recent price increase for grocery store coffee, it will not impact the cost of coffee in our restaurants. Dunkin’ Donuts licensing agreement with J.M. Smucker Company extends only to coffee sold in retail environments like grocery stores, mass merchandisers, club stores, and drug stores throughout the United States,” Michelle King, director, Global Public Relations at Dunkin’ Brands, Inc. in Canton, Mass., said in a prepared statement.

Starbucks Corp. has announced it will not raise prices. Starbucks last raised its prices in January of this year.

Smaller coffee shops are reacting more quickly.

Boston-based FlatBlack coffee house, which has three retail stores in the city, is raising prices about 5 percent this week. A regular latte at the gourmet shop costs $3, up from $2.85.

“We have no choice but to raise our prices, said Jeff Chatlos, co-founder and vice president of FlatBlack coffee shop.

Josh Gerber says he has worked hard to not raise prices at the two locations of 1369 Coffee House in Cambridge that he runs, but he says if coffee prices continue to spike, a price increase is on the horizon for his customers.

Overall, Gerber’s coffee prices have gone up between 5-15 percent over the past year.

“It’s a lot when it¹s your primary product. It’s unfortunate, because I know people are cutting back on their budgets and we¹re working hard to make that morning coffee fix possible,” said Gerber, co-owner of 1369.

William Trull, a roaster for Red Barn Coffee Inc. in Milford, watches coffee prices on his notebook computer as he’s roasting beans. He said Red Barn hasn’t raised its prices yet, but that may change. He expects coffee prices to settle down again, but not until October or November.

Boston Business Journal

Folgers Supermarket Sales Tops all Others

Number of the day 3 to 1

The San Francisco Chronicle reports that according to Bloomberg Business that’s how much of a lead Folgers still has on Starbucks when it comes to sales in supermarkets and other mass retailers. While coffeehouses and flavored lattes have fueled the gourmet trend, stalwarts including Folgers and Maxwell House still dominate in the kitchen, according to research firm SymphonyIRI Group. The bad news? As the world emerges from recession, the number of people making coffee at home is likely to fall, analysts say.

Read more: San Francisco Chronicle

Starbucks’ Instant Coffee Sales Reach $100 million

Melissa Allison repotrts in the Seattle Times that Starbucks does not often disclose sales of individual products. It only recently began saying that Frappuccino is a $2 billion-a-year product.

But the coffee company is excited enough about reaching $100 million in sales of its instant coffee Via, which officially launched last September. It had been tested in Seattle and Chicago since February 2009.

It took Frappuccinos about three years to reach that level of sales, CEO Howard Schultz said in a release.

A survey showed that 55 percent of Via customers drink it at home, 25 percent at work, and 20 percent “while on the go.”

Via is sold at 12,000 Starbucks locations in the U.S. and 37,000 other stores including food, drug and mass merchandise stores like Target. It’s also available in Canada, Japan and the U.K.

Coffee Supplier to Increase Prices by 9%

Greg Farrell in New York and Javier Blas in London report for the Financial Times that the company behind some of the most popular coffee brands in the US on Tuesday became the first to raise its retail prices after wholesale costs hit a 12-year high.

JM Smucker, which distributes the Dunkin’ Donuts, Millstone and Folgers coffee brands to US retailers, said the 9 per cent price increase would be effective immediately.

Kraft, which markets Maxwell House coffee, declined to comment.

Coffee prices hit a 12-year high on Monday of more than 180 cents per pound on the back of low supplies of premium Arabica coffee from Colombia after a string of poor crops in the Latin American country.

Wholesale Arabica coffee prices have surged 30 per cent since early June.

The London-based International Coffee Organisation said recently that the “current tight demand and supply situation” was “likely to persist in the near to medium term”.

Coffee industry executives believe wholesale coffee prices could rise further before the arrival of the new Brazilian crop later this year. “Until October it is going to be tight on high quality coffee,” said a senior executive at one of Europe’s largest coffee roasters. He added: “The industry has been surprised by the scarcity of high-quality beans.”

The wholesale price of other agricultural commodities – including wheat and cocoa – has also risen sharply, opening the door for food companies to increase retail prices in the short term.

So far, none of the major US coffee shop chains, including Starbucks and Dunkin’ Donuts, have announced plans to alter their pricing.

Starbucks, in particular, is sensitive to the prices it charges. Two years ago, following a string of lacklustre earnings announcements, Howard Schultz returned to the company as chief executive and closed underperforming stores and launched a massive renovation programme for existing stores. One aspect of the renovation involved the company’s “pricing architecture”. In response to the perception that a cup of Starbucks coffee cost $4, the chain lowered the prices of some of its offerings.

Tim Hortons, the Canadian chain of coffee houses, which has a large presence in the US, said the chain “books its coffee contracts for at least six months at a time, which protects its restaurant owners and customers from jumps in worldwide future markets”.

Financial Times

Coffee Chains Find Home-brewed Success in Michigan

Jennifer Youssef  writes in  The Detroit News that  there may be fewer Starbucks in Michigan these days, but locally owned coffee chains are slinging more espressos and cappuccinos than ever.

East Lansing-based Biggby Coffee reported its best year in 2009, with revenue topping $40 million, even as food and beverage retailers across the state reeled from a 4 percent drop in sales. Biggby recently opened new stores in Birmingham and Ann Arbor and has eight more in development.

Although a Coffee Beanery franchise closed in Southfield two years ago, the Flushing-based company opened 12 stores last year, including one in Miami and three at Detroit Metropolitan Airport, and more are in the works.

And Ann Arbor-based Bearclaw Coffee Co. has 12 new stores in development and recently opened a mobile unit in Radcliff, Ky.

The growth comes as national chains such as Starbucks are retracting in Michigan and nationwide. Starbucks closed 18 stores in the Great Lakes State last year. Caribou Coffee shuttered three stores in the state the year before.

While the recession has hurt some national chains, the coffee market overall has exploded, said Ric Rhinehart, executive director of the Specialty Coffee Association of America. The U.S. retail coffee market generates $32 billion a year and is poised for growth as the economy improves, he said.

Michigan’s years-long recession has helped local chains, experts say.

Locally based businesses have learned how to remain viable in a tough economy, and they better understand their customer base and can adapt to their needs. They’ve also benefited from the growing buy-local campaigns, with more residents patronizing locally owned businesses.

The ability of these companies to be successful in a bad economy speaks volumes about their business acumen, said Andy Deloney, a spokesman for the Michigan Restaurant Association.

“They’ve been running lean and mean for years,” Deloney said. “They know what it’s like to be in the trenches.”

And their success bodes well for other coffee entrepreneurs.

Detroiter Dona Davis opened her first coffee shop, Pointe Java, in Eastpointe last month and hopes to be as prosperous as her Michigan counterparts.

“It gives me hope to keep moving on,” said Davis, who managed coffee shops for 12 years before venturing on her own. “It makes me think that if they can do it, so can I. It’s just a matter of time.”

From The Detroit News: http://www.detnews.com/article/20100513/BIZ/5130368/1001#ixzz0oktiTJEF

Seattle’s Best Looks for Franchise Chains

Blue MauMau reports that Seattle’s Best Coffee unveiled a new logo and brand strategy on May 11 in an effort to reinvent itself. Part of Starbucks Corporation (NASDAQ: SBUX), the company wants to explode its brand onto the retail scene through high-profile franchise chains and retailers, expanding from 3,000 points of distribution to more than 30,000 by September.

“We are setting out to turn the traditional coffee model on its head with innovative new approaches in every phase of our business – partnerships, retail, and packaged goods – and taking our premium coffee to the places our customers go in their everyday lives,” said Michelle Gass, president of Seattle’s Best Coffee.

Seattle’s Best Coffee will be offered at all Burger King’s 7,250 restaurants in the United States by September. Jenny McCabe, director of communications for Seattle’s Best, says the coffee company chose Burger King as an outlet because the chain helped raise the profile of their beverage, making it more accessible than ever before. “For the September rollout, Burger King will only carry Seattle’s Best Coffee,” says McCabe. She adds, “Consumers will have the option to add vanilla, mocha flavors or whipped toppings. The new coffee will be 100% Arabica beans.”

In April, the Subway sandwich chain rolled out a breakfast menu in more than 23,000 of its U.S. stores that featured Seattle’s Best. These new relationships join Seattle’s Best Coffee’s growing roster of partners, which includes non-franchising retailers like Borders bookstores and AMC Theatres, among others.

“Our new brand identity was inspired by the history of the Seattle’s Best Coffee culture, one of optimism and fun,” said Gass.  “The new brand direction will bring a simplified approach to the coffee category in all the ways it will touch the customer.”

The Seattle’s Best Coffee logo’s reinterpretation maintains the brand’s historic association with its name and the color red while assembling a number of universal coffee symbols, such as a drop and a cup, in an unexpected way. The new logo was designed by Creature, an independent brand and advertising agency based in Seattle.

“Our ambitions for the new Seattle’s Best Coffee brand are as significant as our aspirations to become a multi-billion dollar business, and we designed the new logo to one day become a universally recognized and reassuring symbol for great tasting coffee everywhere,” said Gass.

McCabe adds that key franchise and retail brands will help them accomplish this. “The company is currently looking at a diverse roster of partners to ensure that it is truly making great coffee accessible everywhere,” she says.

Read mote at: Blue MauMau

J.M. Smucker raises prices for Folgers, Dunkin’

(Reuters) – J.M. Smucker Company (SJM.N) said on its website it will increase the list price for the majority of its Folgers, Dunkin’ Donuts, Millstone and Folgers Gourmet Selections coffees, effective Tuesday.

The price increase will be at an average of 4 percent on these products that are sold in the U.S. retail market, the company said.

The Orrville, Ohio-based company said the price hike is due to sustained increases in green coffee, fuel and packaging costs.

The second-position arabica coffee futures contract trading on ICE Futures U.S. closed at $1.3255 per lb on Monday, down 3.7 percent from the end of 2009. The contract hit its 2010 peak at $1.4870 in January.

The second-position robusta coffee futures trading on Liffe finished Monday at $1,352 per tonne, up 1.5 percent from the end of 2009.

“Prices for coffee sold in the company’s other business areas are also increasing during the current fiscal quarter,” the J.M. Smucker said, adding it’s currently in its year-end period.

Kick-Start Your Day With the Dunkin’ Turbo Big Taste Tour from Smuckers

Smucker’s Cross-Country RV Brings Dunkin’ Turbo™ Coffee Across America May Through September 2010
 
ORRVILLE, Ohio, May 11 /PRNewswire/ — Need a boost of delicious Dunkin’ Donuts® flavor to kick-start your day? From May through September 2010, fans of Dunkin’ Donuts packaged coffee can track down the Dunkin’ Turbo Big Taste Tour as it offers consumers across America free samples of the new taste of Dunkin’ Turbo coffee.  Dunkin’ Turbo coffee (11 oz., msrp $7.49-$7.99) is the newest variety of packaged Dunkin’ Donuts coffee, now available wherever you buy groceries.

Thanks to a Dunkin’ Donuts branded RV that’s designed to be a coffee-brewing kitchen on wheels, the Dunkin’ Turbo Big Taste Tour will travel to over 30 U.S. cities, offering wet and dry samples of Dunkin’ Turbo coffee at both large public events and local landmarks. Spending multiple days at 10 major tour stops listed below, the Dunkin’ Turbo Big Taste Tour offers various activities to engage consumers with the new Dunkin’ Donuts blend.  These include:

•Dunkin’ Turbo Wheel – Consumers can spin the Dunkin’ Turbo wheel for a chance to win a variety of prizes, including a year’s worth of Dunkin’ Turbo packaged coffee, Dunkin’ Donuts grocery lists, reusable grocery bags or 11 oz. coffee packages.
•Big Taste Mascot – Take a picture with the Dunkin’ Donuts mug mascot to remember your time with the Dunkin’ Turbo Big Taste Tour.
•Coupon Giveaways – In addition to offering free 3 oz. cups of coffee and 1 oz. dry samples of Dunkin’ Turbo coffee, Big Taste Tour staffers will distribute coupons for $1 off 11 oz. packages of Dunkin’ Turbo coffee, available where groceries are sold.

The Dunkin’ Turbo Big Taste tour will appear at the following large-scale consumer events.  Check out www.dunkinathome.com for a full listing of locations and times.

May 13-15
 World Championship Barbecue Cooking Contest (Tom Lee Park)
 Memphis, TN
 
May 29-31
 Taste of Cincinnati (Fifth St., from Race St. to Broadway)
 Cincinnati, OH
 
June 11-13
 Taste of Charlotte (Tryon St., from MLK Jr. Blvd. to 6th St.)
 Charlotte, NC
 
June 26-27
 Safeway’s National Capital Barbecue Battle XVIII, (Pennsylvania Ave., from 9th to 14th St.)
 Washington, D.C.
 
July 2-5
 Taste of Minnesota (Harriet Island)
 St. Paul, MN
 
July 9-11
 Taste of Dallas, West End (Fair Park)
 Dallas, TX
 
July 23-25
 Gilroy Garlic Festival (Christmas Hill Park)
 Gilroy, CA
 
July 30-Aug. 1
 California State Fair (Cal Expo Fairgrounds)
 Sacramento, CA
 
Aug. 13-15
 A Taste of Edmonds (6th St. and Bell St.)
 Edmonds, WA
 
Sept. 3-6
 A Taste of Colorado (Civic Center Park)
 Denver, CO
  
 About The J.M. Smucker Company

For more than 100 years, The J.M. Smucker Company has been committed to offering consumers quality products that help families create memorable mealtime moments.  Today, Smucker is the leading marketer and manufacturer of fruit spreads, retail packaged coffee, peanut butter, shortening and oils, ice cream toppings, sweetened condensed milk, and health and natural foods beverages in North America. Its family of brands includes Smucker’s®, Folgers®, Dunkin’ Donuts®, Jif®, Crisco®, Pillsbury®, Eagle Brand®, R.W. Knudsen Family®, Hungry Jack®, White Lily® and Martha White® in the United States, along with Robin Hood®, Five Roses®, Carnation®, Europe’s Best® and Bick’s® in Canada. The Company remains rooted in the Basic Beliefs of Quality, People, Ethics, Growth and Independence established by its founder and namesake more than a century ago. The Company has appeared on FORTUNE Magazine’s list of the 100 Best Companies to Work For in the United States 11 times, ranking number one in 2004. For more information about the Company, visit www.smuckers.com.

The J. M. Smucker Company is the owner of all trademarks, except Pillsbury is a trademark of The Pillsbury Company, LLC, used under license; Carnation is a trademark of Societe des Produits Nestle S.A., used under license; and Dunkin’ Donuts is a registered trademark of DD IP Holder LLC used under license.

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