Newspapers and coffee

A few hours after my post this morning about how newspaper publishers might be damaging the golden goose by pursuing petrol and coffee outlets for newspaper sales, News Limited issued a press release trumpeting their relationship with Gloria Jeans. My view is that the News Ltd strategy is flawed on several fronts. It disrespects and diminishes the value of the newsagent retail channel and it increases browse without increasing sales.

In a newsagency newspapers are the premier product whereas in Gloria Jeans they are the low GP add on. Newsagents actively promote newspapers and all their promotions. At Gloria Jeans promotions will always be about margin, that is, coffee.

I don’t see the sense in creating specialist retailers (which newspapers did in newsagents in the 1800s) and then bring about their break up by facilitating more competition through deals like this one with Gloria jeans.

While News needs to put the needs of its shareholders first, newsagents need to do the same. This decision by News will make newsagents question the News commitment to the newsagency channel. News will make more if the release newsagents from stifling rules and reward newsagents for above average growth. Many newsagents will become entrepreneurial if these changes were made and the result would be solid sales growth.

Here’s the full press release.

Newspapers and coffee
Monday April 10, 2006.

Coffee and newspapers in the morning – it’s a combination that’s hard to beat. Now News Limited and Gloria Jean’s Coffees have teamed up to make it an even more irresistible way to start the day.

From today (Monday, April 10) The Australian, The Daily Telegraph, The Weekend Australian and The Sunday Telegraph will be for sale in over 120 Gloria Jean’s coffee houses across NSW.

This national program will see the 174 Gloria Jean’s coffee houses in other states progressively start to sell The Australian, The Weekend Australian and the News Limited metropolitan and regional newspapers in their area over the next six months.

“This deal gives the readers and coffee drinkers what they want,” said News Limited circulation director, Mr Mark Webster.

“Recent consumer research has identified that the growing numbers of Australian coffee drinkers are significant newspaper buyers and that at the same time, drinking coffee while reading the newspaper is a habitual pleasure. It is a formidable combination.”

Gloria Jean’s Coffees is wholly Australian-owned and locally operated. It is the country’s largest specialty coffee retailer, and was recently awarded Australian ‘Franchisor of the Year’. Gloria Jean’s Coffees expert baristas serve nearly 1 million customers a week – whose favourite drinks are cappuccinos, lattes and gourmet iced chocolates.

More than 9,515,000 Australians aged 14 and over read at least one News Limited national, metropolitan or regional newspaper each week.

“Through our partnership with News Limited, we are enhancing the ‘coffee moment’ experience at Gloria Jean’s Coffees,” said Gloria Jean’s Coffees Australia CEO, Mr. Mike Devlin.

“Our coffee houses are a community meeting place where people come together to share delicious hand-crafted coffee in a warm, ambient setting and escape the daily grind. Now they can also relax with the very best in news, views, gossip and sport in Australia and from around the world.”

Mrs Rayma Creswell, CEO of the Australian Newsagents Federation, said the federation supported the initiative. Newsagents will have the opportunity to grow their overall sale by exclusively supplying Gloria Jean’s Coffee houses within their territories and sharing commissions as they currently do with other sub-agents such as service stations, convenience stores and supermarkets.

“We support this because it ensures newsagents will continue to play a pivotal role in the newspaper supply chain. This opportunity provides the majority of newsagents with opportunities for growth in their overall sales. This is about meeting consumer need, it’s about reacting to consumer trends and it’s about ensuring that we maintain involvement and grow our businesses – businesses we rely upon as a cornerstone to long term sustainability,” said Mrs Creswell.

Mark Webster said the goal was to make newspapers more accessible to consumers.

“We expect to increase impulse sales by encouraging new readers to give our newspapers a go whilst also increasing the frequency of sales to existing casual readers. Newsagents, News Limited, Gloria Jeans Coffees and our customers should all benefit from this initiative,” he said.