Why So Late? – #6
One has to ask the question of Folgers coffee a 167 year old company that has been successful up to the last couple of decades. Why do we state the It Starts and Ends with Management? The answer lies with a company such as Folgers Coffee where management could not have been watching the Competition, gauging Demographics, conducting Consumer surveys, acquiring or merging with like Companies, and continuously focusing on a reactive Marketing effort aimed at Folgers maintaining their market share.
Instead, the Management at Folgers most likely adopted a belief that they could not be unseated from their market position. Their strength was a competitive price, sold in Red and Blue cans that approached bulk size to provide coffee drinkers a cheaper way to brew it at home. Yet in the past 2 decades it has been losing Customers to single-serve coffee pods supplied by companies such as Keurig, and to gourmet coffee brands from all over the world. These suppliers provide coffee that features a wide variety of beans that create numerous flavors and tastes.
For Folgers their lack of planning, identifying upcoming Demographics, not conducting a consistent SWOT analysis, the role that convenience of single cup coffee makers provide the Millenium and all previous Generations, and above all not identifying the existing and future role of global competition and the me too replies to competition. Where was the innovation from a Company that has been in the market 167 Years?
We have mentioned global competition, but we sincerely hope that Folgers sees JAB a European holding company that once made pool chemicals is quietly building a coffee empire out of a group of brands such as Krispy Kreme, Peet’s, Stumptown, Panerra Bread and is targeting coffee related assets of Nestle’. At this time they look like a small version of Starbucks, but they seem to have a vision as to what market they want to enter and the kind of companies they need to acquire to make their vision happen. Let’s note that Krispy Kreme, Peet’s, and Panera Bread represent the keys to distribution to include the coffee at the restaurant level.
In addition, Stumptown provides manufacturing sourcing and warehousing/distribution capability. Why wouldn’t Folgers approach JAB to form a joint venture or even get acquired by JAB. They simply need to get back in the race, but they need to recognize that a change has taken place and the next change is coming. They misjudged the impact of single-serve convenience, as well as the demands changing in the demographic segments because they knew coffee well – after all – 167 years in business this approach of ranking on past success will not work forever. This approach does not work!
source: Wall Street Journal