December 17, 1997

R.I. coffee milk maker challenges Starbucks

By RACHEL ZOLL
Associated Press Writer

LINCOLN, R.I. (AP) -- The little Rhode Island company that makes the official state drink is taking on Starbucks.

Autocrat Inc., which makes Rhode Island's beloved coffee milk, is marketing an iced cappuccino mix to compete with Frappuccino, Starbucks' sweet, caffeinated cold beverage.

Can the firm that convinced generations of Rhode Islanders to forsake chocolate for coffee syrup successfully take on the nation's coffee giant?

Autocrat says it would settle for a small share of the market created by Starbucks, based in Seattle.

"If they can help introduce the public to how good an iced cappuccino will be, that's good for me," said Richard Field, who runs Autocrat with his sister, Cynthia Wall.

Autocrat is marketing a syrup called Cafe Frio that can be mixed with milk, poured over ice and blended. The mix has been on grocery store shelves in southern New England and on the West Coast since the spring and will be more widely available next year.

Autocrat introduced Cafe Frio to boost its slow retail sales, now about 10 percent of its business. Its core business is importing and roasting coffee and producing syrups and extracts for ice cream makers. The company failed years ago to sell coffee milk outside New England.

"We're in an industry that for the most part is flat. It's a mature industry," said Field. "But there are areas of growth. This is one of the hottest, if not the hottest new item, in the market."

Starbucks began selling bottled cold coffee in 1995, and now claims control of 45 percent of the estimated billion-dollar iced cappuccino market, according to John Glass, an analyst with BT Alex Brown Inc. in New York.

Other companies tried unsuccessfully to sell the drink. Bottled coffee, popular in Japan and other Asian countries, did not catch on in the United States, where consumers prefer hot to iced coffee, said Robert Nelson, president of the National Coffee Association, a trade group in New York.

The strength of the Starbucks brand and a distribution deal with Pepsico cracked the market, Glass said.

"It's bringing in new people who wouldn't otherwise try bottled coffee here because Starbucks has such a big name," he said.

Starbucks spokesman Chris Gimbl would not comment on Autocrat.

Autocrat has a history with Frappuccino. In 1993, Boston's Coffee Connection specialty store hired Autocrat to make the base for the blended ice drink it called Frappuccino. The next year, Starbucks bought Coffee Connection and the Frappuccino trademark and started bottling and producing its own iced cappuccino drink.

Autocrat then developed a different version of the syrup now marketed as Cafe Frio.

In less than a year, Autocrat has sold enough Cafe Frio to make 12 million glasses of iced cappuccino. A privately held company founded in 1895, Autocrat does not disclose its revenues.

"There are still opportunities to make a prosperous business regionally," Glass said. "Big ideas start small."