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  • QA 147
    Question:
    What are the advantages and limits of (brand) loyalty in coffee marketing?
    Background:
    What are the advantages and limits of brand loyalty in the coffee market?
    Asked by:
    Anonymous
    Answer:

    The Coffee Guide is meant for people who produce and market green coffee beans. Consequently questions on pure retail marketing issues are not normally answered. However, 'brand loyalty' plays a role in green coffee marketing as well and so we shall try to paint a brief picture for both retail and green coffee.

    1. Product consistency is the most important part of retail branding.

    85 to 90% of all roasted coffee retailed are blends of average or 'mainstream' quality, offering a decent but certainly not unforgettable taste experience. The reason most people buy a particular mainstream brand is that they know what they are going to get. It may not always be the best quality perhaps but taste experience is generally quite subjective, i.e. a very personal judgment.

    The green coffees going into these blends can be bought from many coffee-producing countries as most are entirely substitutable, i.e. a roaster does not have to rely on one or two suppliers only. These coffees can be procured from almost anywhere and all a roaster has to do is ensure that over time the end-consumer does not experience any notable taste differences in the roasted coffee he or she buys. This is achieved by the blending of different coffees to maintain blend or taste stability, whilst keeping product cost as low as possible. A good blender will take crop variation out of the end product by switching blend components to ensure he ends up with the same taste experience even when crops come in poorly. Interestingly, this also means that replacing lower quality components with a better type of coffee, for example because of a shortage of particular grades, can be risky. The replacements can change the taste experience to the point where regular consumers actually complain because 'the taste has changed…' *

    But roasters of high quality or specialty coffee, for example Kenya AA, also depend on brand recognition for their product to be, well, recognized… There are many different taste experiences to be had, from many individual roasters that all share the description Kenya AA but, each retail product has to be identifiable or branded to gain (repeat) recognition in a much smaller but also much more crowded market place. If there is a link between green coffee producer and retail branding then here is where it is to be found…

    2. Green coffee

    The marketing difference between mainstream and high quality green coffees is that the former are freely available. Therefore, for the roaster of mainstream quality 'brand loyalty' means ensuring that consumers do not switch to competing brands that offer similar taste experiences, and are freely available within the same price range. This means that if the retail price of one brand is reduced, then comparable brands have to follow suit, something that usually if not always translates back into lower green coffee prices.

    We believe therefore that producers of mainstream or average quality type green coffee can only create something approaching 'brand loyalty' by being efficient and competitive suppliers. All things being equal a roaster is unlikely to discard a particular coffee if it continues to do the job in his blend, and the price is 'right'. That is to say, the producer still has to accept the ruling market price irrespective of what level that may be, but at least he may get the business…

    But for producers of high quality green coffee the active pursuit of 'brand loyalty' is essential if remunerative prices are to be maintained.  Higher quality green coffees offer a different and usually more interesting taste experience. Such coffees can achieve better prices if the producer/supplier is able to regularly supply the same consistently high quality. And if the roaster is able to create and promote an identity, a brand, for it that will keep the coffee in the public eye and will cause end-users to ask for it by name. 

    Promoting green coffee brand awareness and loyalty can increase demand vis-à-vis a more limited supply pool, thereby underpinning prices or even causing them to go up. One danger is however that increased demand causes prices to rise too high, thereby attracting new production into the availability pool. This in turn could cause prices to level out again or even decline. This is a risk faced by many producers of specialised or niche products as, for example, some origins of organic coffee. One potential safeguard is to link up with individual roasters who are willing to spend marketing dollars on a 'special' coffee: promotional dollars behind a coffee translate into consumer awareness! This in turn can lead to longer-term (brand) loyalty that ensures steady sales at remunerative prices, irrespective of whether the market price for green coffee as a whole rises or falls.

    But of course one has to work at retaining that brand loyalty. Mostly by keeping quality and price as consistent as possible, thereby avoiding that the roaster becomes interested to experiment with other coffees of a similar quality profile.

    To summarise

    • We believe that for mainstream or average quality type green coffee a producer can create something approaching 'brand loyalty' only through being an efficient and competitive supplier. All things being equal a roaster is unlikely to discard a particular coffee if it continues to do the job in his blend, and the price is 'right'. That is to say, the producer still has to accept the ruling market price irrespective of what level that may be, but at least he may get the business…
    • For high quality green coffee on the other hand 'brand loyalty' can help ensure steady off-take at reasonable prices, also when market conditions are negative and prices generally are low. But this is a two-way street: the producer may at times also have to forego higher prices in order to retain that off-take…

    * For more on this please see Q&A 083 in the Q&A archive. Topic 11.02.01 of the Guide broadly describes the differences between exemplary or top quality coffee, high quality coffee, and average or mainstream quality coffee. Read chapters 02 and 03 for more on coffee marketing.

    Posted 04 May 2007

    Related chapter(s):
    Related Q & A:
    Q&A 081, 083, 085,131,