Green Mountain Brews Catalog Growth for 2003

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The catalog stands front and center this year in Green Mountain Coffee Roasters Inc.'s plans to expand its direct-to-consumer business.


Though the book, and to a lesser extent greenmountaincoffee.com, accounts for only $4 million, or 5 percent, of the socially conscious coffee marketer's revenue, it shows tremendous growth potential. The aim is to expand the direct business this year by 10 percent to 15 percent.


"It's going nicely, but it's fairly low risk because it's small, so we do get to experiment a bit and we get to push forward our agenda without a risk," said Rick Slade, creative director of Green Mountain, Waterbury, VT.


That agenda is to increase the ratio of multiple sales vs. one-off. More importantly, the specialty coffee company wants to boost its continuity club business, which accounts for one-third of direct sales. Consumers commit to receiving coffee at home for a fixed period when enrolled in the club.


Daystar Data Group Inc., a data processing firm in Schaumburg, IL, is sifting through Green Mountain's database of 250,000 customers and inquirers, including 50,000 e-mail addresses. House files and rented lists are undergoing list hygiene, processing and merge/purge.


Daystar also is sourcing data inputs from Green Mountain to build customer attributes. This will help segment the files for mailings, leading to a more cost-effective circulation strategy that evolves with the database.


A new assignment for Daystar is to determine the percentage of catalog recipients who go online to buy.


"Otherwise, you run the risk of not mailing them a catalog again because you may not have the catalog key code associated with their purchase, so you wouldn't necessarily know that's what generated the order," said Tami Findeisen, analyst at Green Mountain.


"There's this expression that a one-time person is a buyer; once they buy two times or more, they become your customer," said Jim Calhoun, president of Daystar.


Segmentation is starting to pay off, judging by holiday results. Mailing was reduced 40 percent to about 700,000 copies for September to December, down from roughly 1.1 million. Yet revenue from catalog orders rose 13 percent. Average order size jumped $7.75 to $55 at this time.


"We credit that to the additional segmentation that Daystar has provided, which allowed us to be smarter about our circulation," Findeisen said.


Interestingly, much of the company's one-time sales comes at holiday time, an opportunity that needs to be addressed through data processing to increase the lifetime value of a customer.


Though Green Mountain's catalog business has operated for the past seven to eight years, the company has paid more attention to it only since the late 1990s.


"It's really been only in the last five years that we've been in the business seriously and really focusing on the business, because, to a large extent, it helps to position our brand," Slade said.


The company drops one catalog each in the winter, spring and summer, and another four for the fall and holidays.


Like many companies in the coffee trade, Green Mountain's direct business is small compared with its wholesale efforts. Its coffee, some organic- and fair trade-certified, is supplied to convenience store chains, hotels, college campuses, supermarkets, specialty retailers and stores overseas.


Building its fair trade- and organic-certified coffee trade is another thrust along with growing the direct business. That is because the continuity program is the most profitable part of the direct business. And growing the organic part not only reflects its social responsibility, but affects positioning.


"We feel it's important to the company," Slade said. "It's a nice point of differentiation for us. It's very important to us in terms of our ideas as a company."


The fall and holiday catalogs, for example, included a separate section on its fair trade and organic collection. It was eight pages in the holiday book, inserted in the middle, with a different color theme and look. The winter 2003 book has a similar insert. Paper stock is the same, though.


In a tactic used by several brands, Green Mountain added an element of storytelling in its middle-of-the-book inserts.


The holiday edition discussed coffee's role in Mexico on pages selling coffee from that country. Likewise for Africa, South America and Indonesia, where issues of cultural, agricultural and environmental sustainability were discussed.


Also in that section was the Newman's Own line of organic coffee developed along with Green Mountain.


"Because we focused on it and pulled it out as a separate piece of the catalog, we've been able to accelerate the growth of that part of the business," Slade said. "So, for instance, fair trade and organic sales are up approximately 30 percent year over year."


Green Mountain acquires customers through the usual means: rented lists, Web site, e-mail marketing and via wholesale presence. Customers often call the telephone number listed on packages. The company supports such marketing with ads in food and shelter magazines.


But for all the folksy Vermont touch, Green Mountain is aware of competition from global players like Nestle, Unilever, General Mills, Starbucks and Kraft's Gevalia, a major name in the continuity business. And they all sit on the same shelves at Green Mountain's wholesale accounts.


So the catalog also works its charm on retailers that sell Green Mountain coffee.


"Clearly the catalog is a tool that wholesale uses to demonstrate the credibility of the brand ... which does drive demand," Slade said. "But it's also small enough that it's not a threat to them.


"We also make sure not to undercut any one of our [wholesale] customers in pricing," he said. "People buy from our catalog or Web site because of convenience, service and breadth of selection. They don't buy from our catalog or Web site because of price."


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