Dive Brief:
- Kraft Heinz entered a multi-year agreement with IHOP to sell the restaurant chain’s branded coffee in both bags and K-Cups. CEO Miguel Patricio announced the launch during the company’s earnings presentation on Wednesday.
- A Kraft Heinz spokesperson said in an email the partnership will allow the company to combine its scale and capabilities with the fan-favorite IHOP brand. The coffee will hit retail shelves in April.
- This launch will add to the list of foodservice branded coffees available to consumers. Others include Dunkin’ — distributed by J.M. Smucker, McCafé — distributed by Keurig Dr Pepper, and Starbucks — the rights of which were purchased by Nestlé for $7.15 billion.
Dive Insight:
Another favorite restaurant coffee will be coming to grocery stores this spring. The IHOP deal is Kraft Heinz’s only current partnership in the coffee space, according to a company spokesperson.
“This is an example of how we’re taking new and unexpected approaches within some of our product categories,” Patricio said in a pre-recorded earnings presentation.
IHOP’s restaurant coffee, which comes from B2B producer Royal Cup, has been praised for its smooth taste and bold profile. Bringing the same option to a home-brewable blend is likely to be a hit.
While Kraft Heinz’s presence in the coffee space isn’t as broad as some other CPG companies, it owns the U.S. side of one of the storied brands: Maxwell House. The brand was started in 1892, and became part of Kraft Heinz’s portfolio when its previous owner, General Foods, merged into Kraft in 1990. In the U.S., Kraft Heinz also owns the premium coffee brand Gevalia.
However, Kraft Heinz doubling down on the coffee sector is a relatively unexpected development.
The company was reportedly looking to sell Maxwell House in 2019, soon after shocking investors by disclosing a Securities and Exchange Commission investigation into its procurement accounting policies and a $15.4 billion write-down in the value of its Kraft and Oscar Mayer brands. The 2019 surprise led to criminal prosecutions and big changes at the company, but the coffee divestment never occurred.
Coffee is a popular beverage. According to statistics from the National Coffee Association in 2022, two-thirds of people in the U.S. drank coffee within the last day, making it the most popular beverage among adults. And it’s getting more popular with younger consumers. NCA said 51% of young adults between 18 and 24 drank coffee in that period, representing an increase of 11% since July 2021.
When it comes to coffee made at home, many people in the U.S. reach for a brand name they know, either produced by a well-known CPG, or with a foodservice institution attached. According to Statista, Folgers and Maxwell House were two of the five top-selling ground coffee brands in the U.S. in 2020, but so were Starbucks and Dunkin’ branded coffees.
Adding IHOP coffee to grocery retail shelves carries one very distinct advantage beyond brand recognition. While consumers like Starbucks, Dunkin’ and McCafé-branded coffee, they can easily go to a drive-thru at any of those foodservice locations and pick up a hot to-go cup.
While IHOP has a carry-out business, it’s more of a dine-in restaurant, meaning most people who want to enjoy its brew need to actually go and spend some time there. A CPG version of the coffee will instantly make the IHOP beverage more accessible to its fans.
