Continuing its drive to capture the coffee crowd, Salton
The home appliance specialist, which hit it big with its George Foreman grills, appears to view the new appliance as a priority. In its recently completed fiscal second quarter, Salton laid out an additional $13 million on advertising for the coffee machine, a joint venture with German coffee company Melitta Group, and its other new offering, the Westinghouse Beyond Unplugged vacuum cleaner.
The spending, although just 14% of total selling, general, and administrative outlays for the period, caused the company to miss earnings. Salton may see $50 million in sales from both products in the current fiscal year, a modest beginning given its $900 million in revenue last year, but one the company evidently hopes to build on given the promotion behind Melitta One.
Salton is already becoming one of many players in a crowded market. The company was an early mover in the single-serving space when it introduced the Melitta One in the U.S. late last year. Rivals are now close on its heels. The coffee klatch includes Philips Electronics
Despite all of the current interest in the area, a skeptic might wonder about the sustainability of sales for such products. Salton's Melitta One certainly makes single-serving brewing faster and more convenient, but how much trouble, after all, is it to brew a cup of coffee with a conventional machine? At $0.28 per cup, coffee from the Melitta One is cheaper than the joe available at your local Starbucks
At the very least, the intense competition from a group of larger players means that the Melitta One probably won't enjoy the kind of success achieved by Salton's Foreman grill line. That's likely to leave a bitter taste in the mouth of the company's investors, who are hoping the company can find another blockbuster housewares product.
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Fool contributor Brian Gorman is a freelance writer in Chicago, Ill. He does not own shares of any companies mentioned in this article.