Magazine

Folgers and Maxwell House Aim for a Comeback


Supermarket leaders Folgers and Maxwell House are tinkering with their products in a bid for growth, but in a world with so much variety, it's not working

In a post-Starbucks (SBUX) world, when 40 percent of the coffee consumed in the U.S. is classified as gourmet by the National Coffee Assn. (NCA), it's easy to forget about supermarket stalwarts Folgers and Maxwell House.

However, the two still dominate the home brewing market. Folgers, owned by J.M. Smucker (SJM), is the clear leader, according to market research firm SymphonyIRI Group. In regular and decaf grounds, Folgers sold $732 million worth of coffee at supermarkets, drugstores, and mass retailers, excluding Wal-Mart Stores (WMT), for the year ended July 11. Maxwell House, owned by Kraft Foods (KFT), sold $424 million. Starbucks, by comparison, sold only $245 million.

The good news for Folgers and Maxwell ends there. Growth is soft to nonexistent—and the product seems dated. In 2007, its most recent survey of the brands, website Coffee Review noted the category "continue[s] to betray us with coffees that actually seem to achieve the impossible—[they] get worse every time."

While left-for-dead brands like Pabst Blue Ribbon have enjoyed comebacks by promoting regular-guy unpretentiousness, Folgers and Maxwell House recently tried to rehabilitate themselves by tinkering. Maxwell switched its flagship blend to 100 percent arabica beans (from lower-quality robusta) and this year launched a series of "foaming latté" drinks—instant coffee flavors with a layer of foam on top. It also followed the trend of coining fancy-sounding flavors, like its South Pacific Blend. Folgers has Caramel Drizzle and Vanilla Biscotti, and recently added a step in its roasting process. This fall it will unveil a Keurig pod—a powerful symbol of the new coffee regime.

Such changes are unlikely to do more than hold on to wavering loyalists. In a recent sampling of both brands,neither had much flavor. Compared with other choices, Folgers was particularly acidic, Maxwell less so. "The consumer's just so much more aware of the variety out there," says equities analyst Matt Arnold of Edward Jones. "For not much more money, the experience is pretty different in terms of the coffee you can have." During the downturn, the number of those making coffee at home rose from 82 percent to 86 percent, according to the NCA. As the world emerges from recession, expect that number to fall—and Folgers and Maxwell to feel the heat. "If you're ranking opportunity through a growth lens," says Arnold, "this is one of the last places you're going to look."


Coke's Big Fat Problem
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