.. ountain’s. The actual management of the wholesale operation is done from Green Mountain’s headquarters in Waterbury, VT. The distribution facilities are located in Biddford, Maine, Latham, New York, Wodburn, Mass., and Southington Connecticut. The facilities are located within a two-hour radius of most customers and where they aren’t Green Mountain uses Fed-Ex or the United States Postal Service.
The Company’s Wholesale Coffee Pound Sales in Fiscal 1998 by Geographic Region The company generally provides its wholesale customers with brewing, grinding and related product displays at no extra charge. Green Mountain personnel or a contracted service usually installs this equipment where the customer prefers at no extra charge. In addition, each customer is assigned a service technician who service repairs and provides emergency service on such equipment. For supermarket customers, teams of stockers keeps displays clean, appropriately cleaned, and have promotional items to maximize sales. Major Wholesale Customers Hannaford Brothers Company, a supermarket chain, accounted for approximately 9.9% of Green Mountain’s 1998 sales; the contract with Hannaford Bros. runs through 2000 and gives Green Mountain distribution in over 120 stores. Mobil On the run convenience stores accounted for approximately 14.4% of Green Mountain’s sales for fiscal 1998.
Mobil gives Green Mountain a distribution channel of over1,100 stores throughout the country. In august of 1998, Convenience Store magazine awarded its Best Coffee Presentation concept award to Mobil for its display’s featuring Green Mountain. Two other supermarket that chain’s that are helping establish Green Mountain as the leader in supermarket specialty coffee in the Northeast is Shaw’s and Stop & Shop. In spring of 1998, Shaw’s increased the distribution of Green Mountain to over one hundred stores. Stop & Shop gives Green Mountain a full display in the bakery section in over 150 stores.
American Skiing Company is another large wholesale customer of Green Mountains. They have nine alpine ski resorts that all distribute Green Mountain Coffee. Resorts include Sugarloaf/USA and Sunday River in Maine; Attitash Bear peak in New Hampshire; Killington, Mount Snow, and Sugarbush in Vermont; Steamboat in Colorado; Heavenly in California/Nevada; and The Canyons in Park City, Utah. 1998 was the first year of a five-year agreement with Poland Spring, a subsidiary of The Perrier Group of America. The agreement made Poland Springs Green Mountain’s third largest customer behind Mobil and Hannaford Bros., respectively.
Poland Spring has agreed to put large Green Mountain pictorial ads on the back of 200 of its trucks. More mutual marketing ventures such as this are expected to arise from the two companies continued relationship. Direct Mail Green Mountain publishes catalogs that offer their complete product line as well as coffee-related gifts and accessories. Sales from direct mail accounted for 6%, 7%, and 9% in fiscal 1998, 1997, and 1996, respectively. Approximately 37% of this revenue was generated by something Green Mountain labels its Coffee Club.
This is a program that has customized standing orders for re-shipment with over 4,000 consumers. 42% of direct mail sales came from other non-Coffee Club consumers through the catalog. Another 19% of direct mail sales came from business to business sales such as to bed and breakfasts, offices and small retail establishments. As the secure on line purchasing that Green Mountains new web site offers begins to grow, direct mail should start to contribute more to total sales, as e commerce offers any-time, user friendly access to purchasing Green Mountains products. Total Coffee Pounds Sold in 1998 by Category V.
Description of the key elements of Green Mountain’s strategy The presence of Green Mountain Coffee crosses over many different distribution channels and customer categories in its primary geographic market, the northeastern United States. What this does for Green Mountain is provide widespread brand exposure in a variety of settings, ease of access to Green Mountain’s products, and many opportunities to sample their products. Throughout the day a consumer can consume the product: at home in the morning, at the office, at a restaurant for lunch, on an airplane or train to a destination, at convenience stores or a supermarket, and even at a movie theater. Green Mountain believes that it’s coffee’s convenient availability throughout the day for consumer trial is a significant competitive advantage and a key component of their strategy. Consumers who sample their coffee by the cup are likely to develop a taste for Green Mountain Coffee and seek it out through other available distribution channels. Company studies have shown that consumer trial at one level of distribution will lead to subsequent purchases in another area of distribution.
As brand awareness increases through trial by consumers of Green Mountain’s coffee by the cup, demand for whole bean sales of Green Mountain’s coffee for home consumption will also increase. According to the National Coffee Association of America, 76% of coffee is drank at home, and 72% of that is bought from a supermarket. As Green Mountain’s brand equity is built, they believe wholesale expansion will typically continue through customers such as supermarkets, convenience stores and specialty food stores, who in turn sell Green Mountains whole bean to customers. Green Mountain sees this expansion process as capitalizing on the cup/whole bean inter-relationship. This relationship is designed to increase Green Mountain’s geographic share in already strong areas, increase sales density in those areas and according to Robert Stiller, CEO: drive operational and brand-equity efficiencies. By principally leveraging the companies strong wholesale distribution channel, Green Mountain wants to introduce its products in selected markets across the US and internationally. Green Mountains target market is still going to be wholesalers, and for them to grow an integral part of their growth strategy will be increasing sales to retailers who sell whole bean coffee.
They will try to identify new customers such as chain and franchise convenient stores and office coffee services, i.e. the same type of wholesalers they have now, and use these customers for not only additional revenue, but enhance the consumer trial of their product. Green Mountain feels that their core competency is the extremely high quality and convenience of their product. This is something Green Mountain believes the customer can recognize, and that Green Mountain has been and will market in the future. VI.
Critique of Strategy recommendations for changes There is no doubt that Green Mountain is a product leadership type of company. It seems they really pride themselves on the product they produce as being the best in the industry. They project this in their ideas about their wholesale customers. They can use these whole bean buying customers to give consumer trials to people throughout the day which they think, because their product is so good, will lead to these customers developing a taste for their product and purchasing it a t a supermarket where the most coffee is consumed. With the limited business knowledge that I have, I was very impressed with Green Mountain and their overall strategy.
They seem to be hyper-focused on something that they are very good at; developing relationships with wholesale customers. Green Mountain sees their relationships with these customers as their avenue into other markets, which I think is a positive strategy. With the limited business knowledge that I have, I was very impressed with Green Mountain and this strategy. They seem to be hyper-focused on something that they are very good at; developing relationships with wholesale customers and then using these relationships to enter gain brand awareness, as well as brand equity. There is an obvious problem with having customers that have large accounts that provide such a large portion of revenue, what happens if you lose the account? This happened to Green Mountain in 1998, The Coffee Station that ordered 107,000 pounds annually, dropped Green Mountain. In order to protect themselves Green Mountain needs to do a few things.
First they need to keep going after new wholesale customers and work on retaining the ones they already have relationships with. They can achieve the latter through long-term contracts and mutual marketing efforts like the one they have with Poland Spring. Delight their wholesale customers with great service [such as their display maintenance and VIP automatic re-ordering campaign (with direct mail customers)], and a great product. Third, Green Mountain must develop different types of customers through such distribution channels as direct mail/e commerce. They have to diversify themselves in order to be able to absorb a revenue hit if for instance they lost their Mobil account. The web is a great way to do this.
Maybe they could bring in one of those interim CEO’s like they’re doing in silicone valley; to work with/consult, or run their web division. There is little question that they are basically confined to the Northeastern area of the US. They have a very dominant market share in that area , and if they can somehow leverage that market share and expand into other markets they could really grow. The US and Europe are wide open to them right now. Green Mountain has a great strategy of using their target market to enter other markets, and if they can start diversifying themselves and gaining that ever-important brand awareness as well as customer trial, I think their product leadership will allow them to grow.
It really is a great cup of coffee.