• BusinessWeek, Monday, October 8, 2007 12:15 PM

Procter & Gamble and Kraft Foods are facing sluggish sales for their hallmark Folgers and Maxwell House brews--and the demographics are moving against them. Only 37% of young adults between the ages of 18 and 24 drink coffee, compared with 60% for those between 40 and 59 and 74% for Americans over 60, says the National Coffee Assn.

The problem for P&G and Kraft is that their supermarket brands no longer cut it with consumers who have gotten hooked on the darker, richer brews from Starbucks, Dunkin' Donuts, and even McDonald's. Coffee sold through restaurants grew at a compound annual growth rate of 15.2% between 2001 and 2006, but supermarket sales are slated to grow at a compound annual growth rate of 1% through 2011, the National Coffee Assn. predicts.

P&G has recently started distributing Dunkin' Donuts coffee at supermarkets, while Kraft handles the Starbucks brand. Still, the labels have been slow to ratchet up the quality of their canned coffee--perhaps for fear that their core customer wouldn't tolerate a twofold or threefold price increase for, well, supermarket coffee.

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