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Business Observer Friday, Dec. 26, 2003 16 years ago

Brewing Success

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Many people have heard of Melitta coffee. But they don't know the U.S. division is based in Clearwater.

Brewing Success

Many people have heard of Melitta coffee. But they don't know the U.S. division is based in Clearwater.

By Bob Andelman

Contributing Writer

Outside, in the rear employee parking lot, where the line snakes around the building and out into traffic, drivers must delicately maneuver the waiting herd to find an almost legal place to park and wait their turn.

Inside the two-day Melitta USA annual warehouse sale in Clearwater's ICOT Center, the scene isn't much different, as customers must wait patiently for a crack at bricks, cans and cases of gourmet coffee beans, coffee makers, $5 Melitta-emblazoned beach umbrellas and $3 grab bags that are meticulously and mysteriously stapled shut.

Then they get in line again - arms and flatbed carts full of as much as they can carry or push - this time a line snakes through the warehouse and feeds into perhaps eight more checkout lines. This is where yesterday's highly trained IT professional rings up purchases and running credit cards.

Seeing a reporter taking notes about the chaos, Clay Forshee of Feather Sound looks alarmed. "I don't want anybody else to know about this!" she says, only half joking.

Too late.

"I saw an ad in the newspaper and thought, 'What the hell,'" says Dick Dailey, president of the St. Petersburg advertising agency Dailey Communications. Dailey drinks up to five cups of coffee a day. "Melitta Coffee is a little hard to find sometimes. I like it, so I thought this would be a good time to buy six months' worth."

Marty Miller, president and CEO of Melitta USA (revenues "just under $100 million"), says that appearances aside, the popular sale, now in its seventh year, isn't a moneymaker for Melitta. (A portion of the warehouse receipts is donated to Joshua House, which provides shelter care and residential group care services for abused, abandoned and neglected children.)

"It's more public relations for us," Miller says. "We don't make money on that. It's trial."

"Trial" is a big word in Miller's vocabulary these days; it's the umbrella term he uses for getting more consumers to sample Melitta's distinctive coffee flavors. Whereas the warehouse sale was once a way of selling off last year's unsold inventory, today it's as much a way of introducing coffee drinkers to new tastes and products and creating grassroots demand at the retail level.

Several area restaurateurs buy as much discounted coffee as they can store and serve it to their customers for as long as it lasts. Then they switch back to more traditional, unbranded restaurant coffee - until the next sale.

In those customers, Miller smells opportunity brewing.

"Most restaurants don't brand their coffee," Miller says. "They give up a lot of margin selling their everyday coffee by conceding business to Starbucks or Indigo in Tampa. They don't finish dinner in a big way. The Blue Heron here in Clearwater makes coffee a big presentation. One of our sales guys sold them on it. We don't do a lot on food service, but if you can sell them on the concept, it helps them on the gross margins and it keeps customers a little longer. It's a perfect way to end a meal.

"Think about it," Miller continues. "They take such good care in the wine the customer will select. But they don't finish that way. I think it's a big opportunity for the food services trade."

In Miller's view, expanding Melitta's business with restaurants is a two-edged sword. He says that restaurants are a small business segment, but if the company can create hundreds of new places where customers can sample the Melitta brand of coffees, it could create thousands of new buyers in the nation's supermarkets. Again, it's all about "trial."

"We emphasize Melitta Coffee when we do sales pitches to our servers," says Nick Pappas, owner of the Pappas Mediterranean Bistro in Clearwater. "Other restaurants are like, 'Do you want coffee?' But we use the brand name. Their coffee is superb. The vanilla, for example, is awesome; we do mixes of Baileys Irish Cream and Melitta vanilla."

Pappas' family owns five area restaurants including Grillmarks and Geo. Pappas. He says within six months, Melitta will be served in all of them.

Melitta, which has 75 employees at its 100,000-square-foot U.S. corporate headquarters in Clearwater, has a partnership with Salton, which manufactures all Melitta-branded coffeemakers. Its newest product is the "One-to-One," which makes six types of coffee, one cup at a time, in just 45 seconds.

The secret is in the one-serving, disposable coffee bean "pods" that the One-to-One uses. Miller expects it will be most popular in offices. Each person puts in his own flavored pod and 45 seconds later, they have a strong European coffee or a mug of Columbian. The next person can have regular French Vanilla and the next person can have decaf.

"It offers variety that you can't get unless you make different pots," Miller says.

And the only manufacturer of pods for the One-to-One? Melitta. The machine sells for $49; a box of 18 pods is $3.49 to $3.99. "It's also perfect for hotels to put in guest rooms," Miller says.

Melitta is spending significant dollars on another new product development strategy: coffee with 50% less caffeine and lower acidity. "For those who have an aversion to coffee because of the caffeine or acidity, this could be perfect, " Miller says. The product is ready now and is being shown to accounts in Florida. It will be available in stores in the first quarter of 2004.

Melitta filters - manufactured in St. Petersburg - are already available in 90% of the U.S., so the company's real growth opportunity is in coffee. The brand's beans - manufactured in Cherry Hill, N.J. - are only found in 50% of the country. In the Southeast, Publix is Melitta's best and most reliable distributor; the brand has been in and out of Albertson's, Kash n' Karry and Winn Dixie over the years. In the Northeast, Shop-Rite is Melitta's biggest customer.

"Coffee has never been a major focus for Melitta until the last few years," Miller says. "We consciously kept distribution to the 50% level because you can get distribution, but can you keep it and maintain it? Right now we're focused on significantly growing our coffee market and share in the Northeast through better consumer marketing."

Melitta has been in business since 1908, when Melitta Bentz made her first crude filters by punching holes in blotting paper to better filter her coffee. Today, Melitta USA is part of the 50 companies comprising the worldwide Melitta Group. Three thousand employees strong, it is still privately held and operated by her three grandsons, each one managing Melitta's different geographic interests around the world.

When Miller, 46, a 1980 graduate of Western Michigan University, took over leadership of U.S. operations in 2000, he refocused Melitta on its core competencies. He consolidated the rest of its business functions from Cherry Hill to Clearwater, leaving only coffee production in New Jersey. He also closed Melitta's ill-conceived chain of 15 Coffee World stores.

This year, Melitta USA celebrated its 40th anniversary. Miller's boss, Jorg Bentz, told him the time is right for raising the company's profile both locally and nationally, after several years of quiet operations.

"I'm not one to seek out a lot of PR," Miller says. "He came to me one day and said, 'You're doing a lot of wonderful things for the company and the community. You ought to talk about it.' "

So now Melitta is reminding the Tampa Bay area and the country that it is here.

Its national promotional campaign includes an impending Web site upgrade, its first in years, and television commercials for the One-to-One - a first for Melitta. Locally, Melitta is spreading the word about things it has always done, from participating in Easter Seals and Ronald McDonald House to donating holiday turkeys to the church behind its headquarters and responding to a public plea for help from Meals on Wheels when one of its delivery vans broke down.

One of the things Miller - a married father of three and member of the executive board of the Florida Young Presidents Organization - takes great pride in is creating a fun workplace for his 75 employees. This includes a quarterly cash bonus program that benefits everyone from those toiling in the warehouse on up through Miller himself.

New employees receive a coffee maker and coffee. Then they get employee discounts on Melitta products and those produced by partners such as Salton. "Once a month," Miller says, "we ask if anybody wants anything. Then we pay one rate to ship it here."

The corporate boardroom was once filled with pictures of Miller's predecessor; today, the walls are covered with black and white portraits of Melitta employees. These include the "Zoo Crew," employees who organize family picnics, an in-office golf tournament (literally, they play in the halls and offices), bus trips to Universal Studios for $10 per person, a bowling league, ugly shirt day, a company Thanksgiving party and the annual company holiday party at the Renaissance Vinoy Resort.

On the corporate marketing side, Melitta was an early sponsor of the Tampa Bay Devil Rays but has since switched its energy and dollars to the Tampa Bay Lightning. Melitta not only is in its third year as a sponsor but also serves its coffee throughout the St. Pete Times Forum. And it sponsors the Lightning Foundation's annual "Glitz 'n Sticks" charity event for Tampa General Hospital.

"It's another great way to create trial for our brand," Miller says. "You're going to sell more coffee and create more trial at hockey. So we've switched a lot of resources to hockey. It helps that there are more people there; the XO club is very high end. And it helps that I'm a hockey fanatic."

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