Chapter 77
Sometimes, however, the consumer sends the coupons or certificates to the wholesaler, getting the premium direct from him. In another phase of the premium system, the retailer works independently of the wholesaler, buying and giving away his own premiums to promote or to hold trade for his store. This phase is explained in the chapter on retail coffee merchandising.
[Ill.u.s.tration]
[Ill.u.s.tration: LUHRS, OF POUGHKEEPSIE, N.Y., FEATURES FRESHLY ROASTED COFFEE IN HIS WINDOW
Smoke from the roasters is blown into street through the coffee pot hanging over the door]
[Ill.u.s.tration: JOHNSON, OF RED OAK, IOWA, ROASTS BEFORE THE CUSTOMER
Showing a Royal roasting and grinding equipment]
[Ill.u.s.tration: FRESH ROASTED-COFFEE IDEA IN RETAIL MERCHANDISING]
CHAPTER XXVII
RETAIL MERCHANDISING OF ROASTED COFFEE
_How coffees are sold at retail--The place of the grocer, the tea and coffee dealer, the chain store, and the wagon-route distributer in the scheme of distribution--Starting in the retail coffee business--Small roasters for retail dealers--Model coffee departments--Creating a coffee trade--Meeting compet.i.tion--Splitting nickels--Figuring costs and profits--A credit policy for retailers--Premiums_
Coffee is sold at retail in the United States through seven distinct channels of trade; the independent retail grocers (about 350,000) handling about forty percent of the 1,300,000,000 pounds sold annually; and the other sixty percent being sold by chain stores, mail-order houses, house-to-house wagon-route distributers, specialty tea and coffee stores, department stores, and drug stores. Since the beginning of the twentieth century, the independent grocers' monopoly in retail coffee-merchandising has been dwindling at a rate that has seriously alarmed those interests and their friends.
B.C. Casanas of New Orleans, addressing a convention of the National a.s.sociation of Retail Grocers in the United States, in 1916, said that the wholesale coffee roasters of the country had invested in their business $60,000,000; and that $135,000,000 worth of roasted coffee was sold by them every year.
Considering the methods of merchandising, the seven retail distributing agencies may be grouped into three distinct cla.s.ses. The first cla.s.s would comprise the independent grocer, the chain store, the department store, the drug store, and the specialty store, all of which maintain stores where the consumer comes to buy. The second cla.s.s takes in the mail-order house, which solicits orders and delivers its coffee by mail, and sometimes by freight or express. The third cla.s.s covers the wagon-route dealer, who goes from house to house seeking trade, and delivers his coffee on order at regular periods direct to the consumer in the home. As an inducement to contracting for large quant.i.ties to be delivered in weekly or bi-weekly periods, the house-to-house dealer generally gives some household article, or the like, as a premium to establish good-will and to retain the trade of his customers.
New impetus was given to the method of selling coffee by mail when the parcel post system was adopted by the federal government in 1912; and since then this plan has become an important factor in retail coffee-merchandising. Generally, the mail-order houses confine their sales efforts to agricultural districts and small towns, soliciting trade by catalogs, by circular letters, and by advertis.e.m.e.nts in local newspapers, and in magazines which circulate chiefly among dwellers in rural districts.
The majority of wagon-route distributers depend upon the lure of their premiums, and on personal calls, to develop and to hold their coffee trade. The leading wagon-route companies, sometimes called "premium houses", maintain offices and plants in large cities adjacent to the territories to which they confine their sales efforts. At strategic points, they have district agents who engage the wagon men that do the actual soliciting of orders and that deliver the coffee. All wagon-route companies handle other products besides coffee, specializing in tea, spices, extracts, and such household goods as soap, perfumes, and other toilet requisites that promise a quick sale and frequent re-orders. Some of their compet.i.tors complain that they handle only the more profitable lines, leaving the independent local grocer to supply the housekeeper with the items on which the margin of profit is comparatively small.
Wagon-route coffee-retailing began to make itself felt seriously about the year 1900. At first, the premiums usually consisted of a cup and saucer with the first order, the customer being led to continue buying until at least a full set of dishes had been acquired. Later, the range of premiums was expanded; until today the wagon man offers several hundred different articles that can be used in the home or for personal wear or adornment. Practically all the leading wagon-route concerns favor the advance premium method; that is, a special canva.s.ser induces a consumer to contract for a large quant.i.ty of coffee and other products in return for receiving the premium at once, though the coffee is delivered only as the customer wants it, generally two pounds every two weeks. The wagon man delivers the coffee, and is usually held responsible for the customer fulfilling the agreement, and is expected to secure repeat orders with other premiums.
[Ill.u.s.tration: A PREMIUM TEA AND COFFEE DEALER'S DISPLAY ROOM
This is the headquarters store of the Geo. F. h.e.l.lick Co., Easton, Pa., a successful wagon coffee distributer. The premium merchandise is shown in the foreground: the
The importance of the wagon-route plan of coffee-retailing is shown by the fact that in 1921 there were six hundred houses of this kind in the United States; and it was estimated that they distributed eight percent of the total amount of the coffee consumed in the country. The biggest company was capitalized at $16,000,000, and operated eleven hundred wagons. Most of the wagon-route concerns were operating in the central states, practically one-third of them covering the states of Illinois, Wisconsin, Indiana, and Iowa. Pennsylvania is also a wagon-route-dealer center.
[Ill.u.s.tration: TYPICAL CHAIN-STORE INTERIOR EQUIPMENT
This is the Atlantic & Pacific Co.'s store in Rhinebeck, New York. There are nearly 5,000 other stores like it in the United States]
The premium wagon-route distributers have an organization called the National Retail Tea and Coffee Merchants' a.s.sociation. It is composed of 126 members--all of whom use premiums--who operate over two thousand wagons. The largest single wagon-route operator is the Jewel Tea Company of Chicago. The members of this organization claimed to have served more than 2,000,000 families in 1920.
In the chain-store system of merchandising we see the opposite extreme of coffee retailing. The wagon-route man features his delivery service; while in the chain-store plan, all customers must pay cash and carry home their parcels. Though the earliest established chain stores gave premiums, the practise has now been generally abandoned. Roasting, blending, and packing coffee in a large central plant, the chain-store operator advertises that he can sell coffee at a price lower than his compet.i.tors. As a rule, only one grade of coffee is offered for sale.
While it is generally a good medium value, many consumers prefer better quality and go to the independent grocer for it. Others patronize the grocer because of his convenient delivery service, and because he gives credit on purchases. Chain-store organizations seem to be growing rapidly, however; the largest of the chains, the Great Atlantic & Pacific Tea Co., reporting in 1921 that it had nearly five thousand branches throughout the country, which sell 40,000,000 pounds of coffee annually. This chain has a capitalization of $12,000,000, and in 1920 sold $225,000,000 worth of groceries, as compared with $154,718,124 in the preceding year. This company opens about five hundred new stores every year.
The chain-store men are organized in the National Chain Store Grocers a.s.sociation, having thirty members, representing 12,000 stores, operating in eighteen states. It is estimated that there are fifty responsible chain-store grocery organizations in the United States, representing about 30,000 stores. The chain-store grocer turns his stock over from twelve to twenty-five times a year, sells for cash, makes no deliveries, and claims to save the consumer an average of fifteen percent in buying. These stores do business on a net margin not exceeding three percent on sales, as against the average retail grocer's thirty percent, while their average gross cost of doing business has been stated as between thirteen and one-half percent (lowest) and eighteen and one-half percent (highest).
According to Alfred H. Beckmann, secretary-treasurer of the National Chain Store Grocers' a.s.sociation,[337] "Public appreciation of the chain grocery store is rapidly growing. Ten years ago it was estimated that chain stores in what is known as the Metropolitan district of New York did about 12-1/2 percent of the volume of business in their line, while today it is estimated at about fifty percent".
It is estimated that the fifty-odd chain store organizations in the United States distribute through their 30,000 stores 270,000,000 pounds of coffee a year, or about twenty percent of the total amount consumed in the United States.
_Starting in the Retail Coffee Business_
When taking up the retail merchandising of coffee, the practical grocer learns all he can about the popular grades to be had in the princ.i.p.al markets, and how the coffees are grown, roasted, blended, and ground. He also ascertains the best methods of brewing, testing out each grade and kind on his own table, if he does not have testing facilities in his store. He studies the relative trade values of different varieties of coffee, and the requirements of his particular clientele.
An interesting a.n.a.lysis of some 250 grocery stores in the United States[338] made in 1919, showed that twenty-nine percent of the dealers bought all their coffee from wholesale grocers, forty-eight percent exclusively from roasters and specialty wholesalers, ten percent got over one-half of their coffee from wholesale grocers, and thirteen percent bought less than one-half from the wholesale grocery houses.
[Ill.u.s.tration: THE FAMILIAR A & P STORE FRONT]
[Ill.u.s.tration: LAYOUT FOR COFFEE AND TEA DEPARTMENT]
There are two fundamental plans on which a retailer builds a successful coffee business--by buying coffee already roasted, and by buying it green and roasting it in the store. Each plan has its advantages; but its practicability depends upon conditions in different localities.
Beyond acquiring a general talking knowledge about coffees, the retailer buying his stocks roasted in bulk or package form does not generally need the intimate knowledge of his goods required by the grocer who roasts his own coffee. If he grinds the coffee for his customers he must know the type of grind best suited to the way the coffee is to be brewed, and must be able to tell the best brewing method.
The practical grocer who makes up his own blend is acquainted with blending principles and methods. "While he can not expect to be as expert as the large wholesale blender, he should know that green coffees are generally cla.s.sified by blenders in five great divisions; (1) Brazils, including Santos, Bourbon and flat bean, Rios, Victorias, and Bahias; (2) Washed milds, embracing, as of the most commercial value, Bogotas, Bucaramangas, Guatemalas, Mexicans, Costa Ricans, Maracaibos, and Meridas; (3) Unwashed milds, such as Maracaibos, Bucaramangas, La Guairas, and Mexicans; (4) Javas, Sumatras, and Padangs; (5) Mocha, and Harari."
[Ill.u.s.tration: ONE OF THE RETAIL COFFEE-ROASTING STATIONS IN SOUTHERN CALIFORNIA]
[Ill.u.s.tration: CLOSE-UP OF THE MINIATURE MANUFACTURING PLANT, SHOWING THE ROASTING AND GRINDING EQUIPMENT]
[Ill.u.s.tration: APPLYING THE SPECIALIST IDEA TO COFFEE MERCHANDISING
The Pacific Stores Co., Los Angeles, cutting out deliveries, premiums, and solicitors, has built up a business of more than 100 bags of coffee daily, selling direct to the consumer in a chain of 100 booths patterned after the country-roadside gasoline stations; each one having its own roaster]
[Ill.u.s.tration: SELF-CONTAINED MONITOR GAS ROASTER, COOLER, AND STONER]
It has been found by experience that a good a.s.sortment for the average retailer to carry consists of Santos, because of price; a natural unwashed Maracaibo or Bucaramanga, because of full body and general blending values; and a washed coffee, preferably a Bogota, which gives quality and character to a blend. In stocking up with these coffees, the practical merchant avoids Santos with a strong or Rioy flavor, bitter or "hidey" Maracaibos, and acidy or thin Bogotas.[339]
A grocer equipped with these coffees has the Santos for his low-priced seller. For his medium grade he blends Santos and Maracaibo, half-and-half. The next higher grade is made up of one-third each of the three coffees; while the best blend consists either of half-and-half Bogota and Maracaibo, or three-quarters Bogota and one-quarter Maracaibo.
The chief advantage of these three coffees is that they blend well in any way they are mixed; and the dealer with a little experience, and working with the two necessary ideas in mind--satisfactory coffee and price--can make up various combinations.
In view of the fact that the United States imports coffee from more than a hundred different sections of the world, and that there are wide variations in flavor among the coffees produced in each of the hundred, it is easy to understand that the blender has an almost unlimited supply from which to make up a blend with a distinctive individuality.
Practically all coffee importers, and most wholesalers, are thoroughly acquainted with the relative trade values of the different coffees, and help their customers make up desirable blends.
_Small Roasters for Retail Dealers_
While the wholesale coffee roaster is obliged to instal a large and somewhat complex equipment, the retailer must use a small, compact, self-contained unit that does not take up much s.p.a.ce in his store, and that is easily operated. Retail roasting machines are constructed on the same general principle as the wholesale roaster. The roasting cylinder is generally revolved by electric power, and the heat is derived from gas or gasoline fuel. Cooling is by air suction in a box attached to the roaster. The capacities of the machines range from ten to three hundred pounds, the operating cost running from approximately eight cents per hundred pounds for gas fuel and ten cents for electric power. The roasters cost from three hundred dollars for the smaller sizes, to fifteen hundred for the one-bag type; and to two thousand or three thousand dollars for the two-bag type.
One coffee-roaster-machinery manufacturer has recently brought out a gas-fired, electrically operated fifty-pound miniature coffee-roasting plant designed for retail stores, which comprises a roaster, a rotary cooler, and a stoning device, that sells for six hundred and fifty dollars.