Question-and-Answer Session
Operator
(Operators Instruction) Your first question comes from the line of David Tarantino - Robert W. Baird.
David Tarantino - Robert W. Baird
Question, first, about the grocery business. Could you elaborate on what you are seeing in terms of your grocery sales year-to-date and why you think that trend will only last for six months?
Patrick J. O’Dea
Let me step back for a second here. I think first, it is clear from the data, the most recent data that we have, that mainstream coffee and grocery stores is enjoyed a little bit of an uptick due to the economy and that the specialty category growth rate has come down a little bit to about 7% in the fourth quarter versus a 12% growth rate for the full year 2008. So, there has obviously been some dynamic and trade down that occurred there. However, despite that in the fourth quarter we are able to grow 23% equal to our annual growth rate and part of the way we had to do that was give back a little bit of the price increase that we took in August in the form of sort of some increased promotion.
I think what I am seeing happening now in the short term is there are groceries out there who would just assume one up kind of hold on to the higher pricing that they have now and instead of sort of getting the price right everyday and so the dynamic that occurs in the marketplace is sort of workers’ manufactures to get significantly more promotional spending and sort to try to bridge the gap if you will by going much deeper on promotion and then holding their everyday price and not only works for a very short period of time because you get a big spike in sales but it is not sustainable and what happens is the consumers just get trained not to buy unless it is on promotion.
So, based on my experience and what is occurred in the past, after a few months of seeing that that does not work, what will happen is the grocers working with people like us will get the everyday price right and then get back to a more sort of stable everyday price promotion strategy, which is sort of better for the branch, better for the category etc. I think in the short term you can see some pretty irrational things happen but when they do not work that the ultimate solution will be that prices will come a bit in grocery stores on an everyday basis and then a category starts growing again.
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