New product rollouts and a double-digit increase in sales are driving new sponsorship activity on behalf of coffee retailers.  

Demonstrating the growing popularity of the caffeinated beverage, sales in the coffee category rose 20 percent to $4.68 billion in the year-ended March 18, 2012, according to SymphonyIRIGroup, a market research firm.

With the exception of instant decaffeinated coffee, every segment of the category posted healthy growth. Single cup coffee led the pack with a 119.4 percent increase in sales, followed by ground coffee with a 15.4 percent rise.

The increase in sales has helped prompt new sponsorship and endorsement deals on behalf of both upstart and mature players in the category.

Case in point: Stumptown Coffee Roasters this year has signed new ties with Texas’ Austin City Limits Music Festival and Chicago’s Lollapalooza music fest. It also will sponsor MusicfestNW, an event located in its Portland, Oregon hometown.

The coffee roaster, which operates stores in Portland, New York City and Seattle, aligned with ACL and Lollapalooza to support its growth ambitions. The company reportedly plans to expand to new markets and launch a line of bottled chilled coffee after receiving a cash infusion last year from TSG Consumer Partners, an investment firm that specializes in specialty drinks.

On the endorsement front, Dunkin’ Brands Group, Inc.’s Dunkin’ Donuts brand earlier this year inked a two-year partnership with NFL New England Patriots tight end Rob Gronkowski. The tie adds to an extensive sports-centric sponsorship portfolio that includes the New England Patriots, NBA Boston Celtics, NFL New York Jets and other properties in the Northeast U.S. and other markets.

“Coffee has always been and continues to be a healthy and competitive category,” said Marc Riccio, the New York Jets’ senior vice president of corporate sales, marketing and stadium development.

The category could become even more competitive from the growing number of upstart brands and line extensions in the energy drink category, some of which are positioning their products as an alternative to coffee.

Below, IEG SR shares five hot buttons for the coffee category:

Promote specialty drinks. Coffee retailers are increasingly using sponsorship to promote new product launches and other product lines.

Dunkin’ Donuts activates the Boston Celtics with an in-store ticket promotion on behalf of its iced coffee product. The Caught Cold promo awards tickets to consumers who are caught drinking the product at a local Dunkin’ Donuts location.

“It’s been successful for them, and it’s a great way for us to promote our brand as well,” said Ted Dalton, the Celtics’ vice president of corporate partnerships and business development.

Dunkin’ Donuts runs a similar promotion with the MLB Boston Red Sox, New England Patriots and other local teams.

Gain on-site sales rights. Like other types of beverage companies, coffee retailers frequently look for on-site sales opportunities.

For example, Dunkin’ Donuts operates two express outlets as part of its sponsorship of the XL Center in Hartford, Conn. The retailer has a similar arrangement around many of its other sponsorships.

Coffee retailers also look for the right to sell through venue concessionaries. That’s the case with Tim Hortons, Inc., which leverages its partnership with the NHL Buffalo Sabres to gain pouring rights in the First Niagara Center.

“Instead of selling a generic coffee, we facilitated an arrangement between Tim Horton’s and our concessionaire,” said John Livsey, the Sabres’ vice president of sales and business development.  

Tim Horton played for the Sabres after founding the coffee and donut chain, he added.

Coffee companies also look for sampling opportunities. For example, Dunkin’ Donuts samples coffee prior to the start of the Under Armour Baltimore Marathon, while Caribou Coffee Co. leverages its sponsorship of the Mall of America by sampling product during the mall’s Black Friday shopping event.

Tout new product launches. Coffee marketers are increasingly using sponsorship to promote single-serve coffee products.

Case in point: Green Mountain Coffee Roasters, Inc. last year sponsored the Atlanta Arts Festival to promote its single-service ice coffee products. The company sponsored the festival on behalf of the Brew Over Ice brand.

Engage distribution channels. Where possible, properties should try to leverage coffee partners with sponsors in the supermarket category.

For example, Denver-based Boyer Coffee Co. activates its sponsorship with Dick’s Sporting Goods BolderBOULDER road race with an event-themed coffee blend sold through King Soopers grocery stores, an event cosponsor. Boyer distributes a coupon in race packets that is redeemable at the grocery store.

In a different twist, Boyer samples coffee at the event with WhiteWave Food Co.’s International Delight creamer, another cosponsor.

Go slow on category exclusivity. While competition has increased, many properties do not sell exclusivity in the coffee category. Those that do typically include the category as part of a larger deal in the beverage or QSR category.

Some companies are placing more interest in exclusive deals. For example, McDonald’s Corp. over the past few years has placed more focus on the coffee category to promote its McCafĂ© coffee line. 

Properties that work with more than one company in the category can provide a point of differentiation by offering entitlements and activation platforms that partners can own.

Case in point: The Boston Celtics work with Dunkin’ Donuts and Cumberland Farms, both of which use the partnership to promote coffee. Dunkin’ leverages the tie with the in-store Caught Cold promotion, while the c-store chain hosts on-court promotions on behalf of its Farmhouse Blend coffee line.

“We try to give ownership of specific assets to partners that share a category,” said Dalton.

Rising Sales In The Coffee Category
Category Dollar sales 2012 Sales increase
Single cup coffee $601.8 million 119.4%
Coffee additives/flavoring $13.4 million 25.3%
Ground coffee $2.89 billion 15.42%
Whole coffee beans $349.5 million 7.83%
Instant coffee $479 million 7.68%
Ground decaffeinated coffee $261.8 million 3.87%
Coffee substitutes $1.02 million 2.66%
Instant decaffeinated coffee $88.7 million (2.38%)