New Things Are Brewing at Eight OClock Coffee

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The Eight OClock Story

Eight OClock whole bean coffee sold in A&P stores since 1859 1920s - 1950s: #1 Retail Coffee brand in America 1970s: Eight OClock begins selling to third party retailers Established large C-store Retailer partnership 1980s: Pagkaging innovation - freshness valve 1990s: Product innovation - blends and flavors Rated #1 retail coffee brand by Consumer Report 2003: Became a stand-alone organization Rated #1 By Good Morning America 2004: Introduced ground coffee line extension Rated #1 Buest Buy by Consumer Report 2009: Rated #1 Coffee by Consumer Report March 2009 Issue
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Eight OClock Coffee Owns a Unique and Valued Position in the Coffee Marketplace!
Brand:

Positioning:

High quality coffee at a reasonable price (Value Gourmet) Best tasting cup of coffee Better beans make a better cup
-High quality 100% Arabica beans Over 150 years of coffee expertise
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Benefit: Reasons why:

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Clear Leader in the Value Gourmet Segment

Higher Quality at a Value Price
PREMIUM GOURMET

Premium Quality -100% premium Arabica Premium Price Starbucks = 63% of segment

VALUE GOURMET

High Quality -100% Arabica Value Price EOC = 54% of segment

REGULAR GOURMET

Good Quality -Robusta blend Low Price Maxwell House & Folgers = 82% of segment

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EOC Meets the Needs of All Coffee Consumers

Overall Acceptance
7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5
Total Ground Users (n=159) Taragon Corporation, October 2004

Starbucks Eight OClock Maxwell House Chock Full O Nuts Folgers Classic Dunkin Donuts Maxwell House Eight OClock Folgers Classic Chock Full O Nuts Dunkin Donuts Eight OClock Dunkin Donuts Chock Full O Nuts Folgers Classic Maxwell House

Starbucks

Starbucks
Weak(er) Coffee Segment (n=119) Strong(er) Coffee Segment (n=40)

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Eight OClock Coffee Leads Competitors on Key Taste Attributes

Blind Taste Test Results Overall Taste
37% 27% 22% 23%

Freshness
36% 24% 27% 24%

Richness
41% 33% 25% 26%

Smoothness
41% 28% 29% 29%

Eight OClock

Maxwell House

Folgers

Starbucks

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Coffee Ratings
Within types, in order of overall quality. Product

Consumer Reports.org
Costs Caffeine level (mg/cup) Per pound Per cup Earthy

Attributes

Key Number

Papery

Woody

Fruity

BEST BUY

1 2 3 4 5 6 7 8 9 10 11 12 13

CAFFEINATED 100 percent Colombian brews. VERY GOOD Fragrant with floral and earthy notes. Good choices even when black. Eight OClock Coffee 100% Columbian $6.28 .15 140 Caribou Coffee Colombia Timana 11.76 .36 195 Kickapoo Coffee Organic Colombia 14.33 .40 155 GOOD Fewer or weaker favorable flavors, more or stronger flaws; milk and sugar may help. Starbucks Coffee Colombia Medium 11.53 .25 115 Bucks County Coffee Co. Colombia 8.85 .34 195 Archer Farms (Target) Colombia Supremo 9.05 .27 180 Gloria Jeans Coffees Colombian Supremo 12.99 .32 110 Chock ful l oNuts 100% Colombian 5.19 .10 110 Peets Coffee Colombia 14.12 .31 130 Maxwell House Colombian Supreme 100% 4.80 .05 55 Colombian Med-Dark Folgers Gourmet Selections Lively Colombian 8.67 .09 60 Medium Roast Millstone 100% Colombian Medium Roast 11.55 .13 60 Folgers Coffeehouse Series 100% Colombian 5.11 .05 50 Med-Dark

Nutty

Burnt

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Eight OClock Consumers are Extremely Loyal

77%
Total lbs./buyer Whole Bean Loyalty

54% 47% 44%

Eight OClock

Starbucks

Folgers

Millstone

Nielson Household Panel 2/21/04

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Current Industry Situation

A record 2.4 Billion lbs of roasted coffee was consumed in the US last year More than 60% of the population drinks coffee; the highest rate ever Out of home consumption is increasing 6% last year; in-home consumption declined 6% 57% of people who drink coffee at work purchased it outside of the office Young people are rejecting robusta based coffees such as Folgers and Maxwell House Private Label is on the wane; too much confusion for customers; brands more prevalent in turbulent times With gas and cigarette margins declining in C-stores, coffee is often the #2 profit generator for the store; and retains loyal customers C-stores continue to improve coffee offerings; increase profits in category; increase customer loyalty and frequency through coffee POS and branding within the store is extremely important
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Filter Packs

vs

Ground Coffee
There is a reason filter packs are not used at Starbucks, Dunkin Donuts, McDonalds, 7-Eleven, gourmet restaurants and coffee cafes... They make lousy coffee!

Filter Packs do not lie flay in the brew basket This produces a very inconsistent cup of coffee Some are strong, some are weak Customer ends up paying for coffee that may not get brewed Once foil package is opened, coffee starts going stale

Ground coffee sits evenly in the brew basket Maximum, consistent flavor is extracted during brew cycle It takes 5 additional seconds to brew a great tasting coffee 24 pots/day - thats only 2 minutes extra Grinding whole beans will increase sales an additional 15%! 10 more cups sold per day = $2500 in additional profits!

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Potential Profits
Selling 10 more cups a day per store equals an additional $2500 in profits per location!
PROFIT CALCULATOR 16 OUNCE CUP How an increase in coffee quality affects per store profit ADDITIONAL CUPS SOLD PER DAY
SELLING PRICE PER CUP PROFIT PER CUP MARGIN

Increased Coffee Cost Per Cup Current Cups Sold Per Week Wasted Cups Per Week Increased Annual Coffee Cost 2 5 $913 10 $2,554 20 $5,836

$0.01 700 35 $728

$1.15

$0.90

78%

-$72

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POS and Branding

Eight OClock Coffee has developed and great POS package for restaurants, c-stores, and cafes POS is readily available POS is expensive. Selection of materials should be geared for the anticipated volume of the location Small venues 10-14 lbs wk (40 cups day)

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POS and Branding

Large venues 15 lbs wk (65+ cups day)

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Summary
Competition is getting fierce Coffee is a 70% Margin business for a retailer Increasing Throw Weight is Most Significant Improvement You can make Provide Dark, Robust Options Brands are coming back strong Condiment choices are increasing Operational control at store level is critical Excellent time to raise retail prices to keep up With wholesale increases

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