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Filters lead way in Melitta's coffee industry success

Martin Miller and his 135 employees produce a third of all paper coffee filters sold in the U.S. and 57 percent of the conical ones.

CHRIS ZUPPA | Times

Martin Miller and his 135 employees produce a third of all paper coffee filters sold in the U.S. and 57 percent of the conical ones.

Melitta's premium Arabica coffee sales in U.S. supermarkets trail of those of bigger players like Maxwell House and Folgers.

But the fourth-generation, family-owned Melitta dominates another part of the coffee market: paper filters.

From a plant in Clearwater, the German company started by paper filter inventor Melitta Bentz in 1908 cranks out a third of all paper coffee filters sold in the United States and 57 percent of the conical ones. Mr. Coffee is a distant second with 4 percent.

Sales topped $100 million in 2009, up from $90 million five years ago. But Melitta has not been immune to the downturn.

Martin Miller, 52-year-old president of Melitta USA, talked recently with the St. Petersburg Times about how he got his start making sales pitches through bulletproof glass in Detroit and what's currently brewing in the coffee business.

How did you get in this business?

My father was a food broker. I figured people always have to eat, so I got a degree in food marketing from Western Michigan University and went on to Vlassic pickles. My father put me to work summers selling Breyers yogurt and ice cream and Ball home canning products. My first route was downtown Detroit, where I merchandised shelves and learned how to make a sales pitch through bulletproof glass.

What was your biggest challenge?

At age 5, I was in a full body cast — head to toe — after being cut out of a wrecked car hit by a drunk driver. I had multiple surgeries. You just had to deal with it, so I focused on getting better. I played baseball, football, basketball and ran track in high school. I wasn't that great, but got there on attitude.

Melitta endured the economic downturn with no layoffs among your 135 employees and held off until 2010 the first wage freeze in company history. Is that why you cut back employee parties and marketing expenses like sports sponsorships with the Lightning and Rays?

We weathered the storm pretty well and have been conserving cash to pay for a new $10 million coffee-roasting plant to replace our 40-year-old facility in Cherry Hill, N.J. That will help us to be much more efficient and, in addition to cans, begin packaging our coffee in double-insulated foil bags. That's where all the growth is.

Our unit volume has been flat while Colombian coffee prices hit a 25-year high and steel and paper pulp prices rose dramatically in 2009. We were only able to take our prices up 6 percent instead of the 11 percent needed to offset higher commodity expenses.

We consider our people our most important asset, right up there with product quality. Pricing got more competitive, so we used the savings from higher plant efficiency to take $2 out of a can of coffee.

Is that your new Cafe Collection brand, which comes in foil bags and recently debuted in the Philadelphia market?

It is a great cup of coffee at a very competitive price and should be widely available in Tampa Bay next year. Premium rivals are priced at $8.99 or $9.99 for an 11.5-ounce bag. We're at $5.99, $1 less when it's on (promotional) deal. Because we use an extra-fine grind, you can extract 30 percent more flavor per cup. We think it really fits the economic times.

What's the big secret behind the popularity of your conical paper filters?

We have a patented process for injecting thousands of tiny Flavor Pores in the paper and stamp in a distinctive double crease to bind the paper.

You're losing sales to coffeemakers with built-in metal filters. What's your response in the marketplace?

As a company, we are committed to sustainability. Paper is a renewable resource, while metals like brass or stainless steel are not. We also introduced a more sustainable filter that's 60 percent bamboo.

You wound down your business in Java Pods — ground coffee prewrapped in filter paper for machines that brew one cup at a time. You have steered clear of joining Tassimo or Keurig, makers of the fast-growing capsule system owned by Green Mountain that is replacing pod coffeemakers. Why?

Well, we did sell 600,000 Java Pod systems since 2005, so it was profitable for us even though the bigger guys Maxwell House and Folgers failed to develop a U.S. market for pods. We see plastic coffee capsules not as environmentally friendly as paper.

What's the next big thing in making coffee by the cup?

We're seeing a comeback in pourable manual systems. Ours is called "Ready. Set. Joe." It fits right over a cup. Just pour in hot water. Some Starbucks and many independent coffee shops are using them. So people are getting educated about this simplest form of making coffee a cup or pot at a time.

Sales are growing about 10 percent. The grounds are completely soaked to totally extract the most flavor. It's better than a coffee press that leaves in all the cholesterol, oils and sediment that our filter removes with a pourable system.

Mark Albright can be reached at albright@sptimes.com or (727) 893-8252.

Filters lead way in Melitta's coffee industry success 05/16/10 [Last modified: Friday, May 14, 2010 8:25pm]
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