The hot beverages category has always benefited from a high volume of TV advertising – think of any major brand and you will probably instantly recall a jingle or a campaign such as the Gold Blend couple – and the market leader Nestlé is aiming to up the ante even further with its spend on Nescafé over the next 16 months.
Starting with its ‘Nescafé – coffee at its brightest’ campaign this month, it will spend Â£12.5m by the end of this year and a total of Â£43m by the end of 2010, according to Graham Walker, trade communications manager of Nestlé UK. He says: “The campaign is set to reignite the category and return Nescafé to its iconic status.”
The reason for the campaign is not because hot beverages are not successful – distribution is at 98% across UK households – but because consumers currently perceive instant coffee and tea as functional and not engaging.
The aim is to remind consumers of coffee’s provenance as a natural product and bring in a new generation of drinkers.
In the convenience sector instant coffee is the star of the hot beverages market. According to IRI, its sales figures for the convenience channel for the 52 weeks to July 11 show the total hot beverages category up 3.1% to Â£182m. Instant coffee had a 47.3% market share and sales were up 5.6%. Sales of tea, which had a 37% share, were down 0.5%. Walker says the recession appears to have sparked a complex trend in the coffee market with consumers cutting back on spending out of home, but splashing out on premium brands for home consumption. Nestlé’s premium Gold Blend brand is up 10.3% while its super premium brand Alta Rica is up 26.8% and its Cappuccino and Latte are up 17.6%.
But he says too many independent retailers, and their wholesalers, are missing out on the opportunity that this trend presents because they are not stocking these fast growing brands. Only 60% of unaffiliated independent retailers stock Gold Blend and less than half stock Cappuccino or decaffeinated Nescafé.
For this reason Nestlé is looking to work with wholesalers to encourage their customers to stock a core range of the best sellers. Walker says: “If we can get the distribution figures to where they deserve to be this will produce a fantastic boost to sales for wholesalers and their customers.”
Olivier Kutz, brand manager, Douwe Egberts Coffee Systems UK, agrees that there has been a change in the market. He says: “The UK consumer’s taste has shifted, reflecting the recent influence of the growth of high street coffee culture, so quality is all-important. The Douwe Egberts brand is a credible trade-up across all coffee formats. It offers cash and carry and wholesale customers an attainable, premium brand.
“We have a strong consumer brand with a solid reputation for quality, yet the brand is very accessible – premium mainstream rather than niche. This is an advantage that we try to fully leverage in wholesale and cash and carry channels, supplying branded materials, such as branded pallets, to our customers where appropriate.”
He says Douwe Egberts Pure Gold Instant is the fastest growing freeze dried instant in retail (market share doubled in the last five months), and is also one of its key products in cash and carry and wholesale. The Pure Gold Professional range is also available to cash and carry customers in a new 1kg tin, 750g tin, 500g tin and it will be launching its instant sticks in a branded dispenser box soon.
Kutz says: “Our Professional Espresso Beans range is now well established in all main cash and carry outlets, as well as our Traditional Roast amp; Ground.
“We are still building distribution in delivered wholesale channels with some good initial successes, but our distribution is more established in cash and carry catering as we launched into that channel a year and a half ago. We have now established a good base volume in wholesale and as there is still much scope for us to grow further, we will be spending the next year building long-term relationships with key wholesale players.”
Rombouts is another coffee brand seeking to expand its business in the cash and carry sector. From this month control and administration of the Rombouts Coffee cash and carry business in the UK transferred from Premier Foods to family owned Rombouts Coffee GB Ltd.
Managing director Rob Briggs says: “Rombouts is a leading supplier of quality roast and ground coffees to the catering trade, and we will use our out of home expertise to benefit the cash and carry market, allowing us to be more responsive to their needs. The retail, foodservice and cash and carry areas of our business will all operate from our Berkshire-based head office in Crowthorne.”
Typhoo Tea says it is also planning to make in-roads into the wholesale coffee market. It says that as part of a re-launch of its Red Mountain instant coffee, it will be launching new Red Mountain products to cater for cash and carry, foodservice and impulse outlets.
Kraft, the maker of Kenco coffee, agrees there is a trend towards premiumisation but also believes that consumer interest in sustainability is another issue driving growth, and that its Kenco brand is well placed to serve this demand.
Kraft Foods now sources 75% of the beans for its Kenco freeze-dried coffee range from Rainforest Alliance Certified farms, and aims to buy all beans from Rainforest Alliance Certified farms by 2010. Louise Stigant, commercial director of AFH and convenience at Kraft Foods UK, says: “Consumer interest means retailers and wholesalers should be looking to include a sustainably sourced offering in their instant coffee range.Â With Kenco, consumers who love quality coffee but who are worried about the social and environmental consequences of their choice are also reassured that they are getting the same great taste with an added ethical benefit.”
Jon Marlow, head of sales at Cafédirect, says: “From the coffee shop to the convenience store we’re seeing a greater demand for ethical options and the latest figures suggest that the recession is not curbing demand. Fairtrade hot beverages are growing ahead of the market in both value and volume.
“Despite Fairtrade hot beverages putting in a consistently strong performance,Â overall the wholesale and convenience sectors are slow to respond to this growing area of potential, falling well behind the grocery multiples. Fairtrade is still a little hit and miss with some wholesalers not featuring Fairtrade at all within their fixtures. We would like to seeÂ these sectors work harder on their ethical offering and partner with strong, well known brands such as Cafédirect. We know that the ethical consumer tends to have a greater disposable income. These shoppers are not just price driven but interested in values such as provenance and the livelihoods of the farmers, and they will pay extra for that reassurance. If they can’t get Fairtrade in their local store there is a strong chance that they will shop elsewhere.
“To satisfy consumer demand we would recommend, as a minimum, merchandising a Fairtrade alternative alongside the standard hot drinks range. This means offering a recognised Fairtrade brand of instant coffee, roast and ground coffee and teabags. This year we’ve invested Â£3m in both the brand and the category to ensure we continue to stand out from the crowd. This includes a complete re-design of our portfolio and a new communications campaign.”
Douwe Egberts also sees sustainability as highly important. It has partnered with Utz Certified – a Netherlands-based not for profit organisation whose certification process covers human, environmental and financial aspects for the benefit of the coffee farms and the workers.
Olivier Kutz says: “We are working towards a 100% certification on all our products and to start the transition we have launched Good Origin – our 100% sustainable range.”
Tetley is the best selling tea brand in impulse, according to Nielsen figures to July 11, with a 34.16% value share and 38.43% volume share, and also has the number one spot in catering packs in cash and carries with 38% volume share and 39% value, up 5% and 13.3% respectively.
In the overall retail market there has been 3.5% growth in sales, but this has been driven by inflation as there was a 4% decline in volume. However, Simon Attfield, customer marketing controller, Tetley GB, says: “Cup for cup tea is an affordable drink and is proving recession resilient. Even with recent retail price increases tea still costs less than three pence per cup and remains a staple shopping item. We are seeing more demand from shoppers for value for money. Tetley price-marked packs and extra free offers have been important drivers for sales of Tetley products.”
He adds: “Visibility of the key brands and consumer confidence in the quality of these brands is important to sales. Tetley and PG are important stock items and continue to dominate black tea sales, selling 10 percentage points more than the number three brand.
“Cost-conscious consumers are trading down from high end teas to more price-realistic brands. This is most evident in niche areas such as green and rooibos, where the trusted Tetley brand is performing strongly. Tetley Green Lemon 50s are now the second best selling green tea in the market with sales more than doubling over the last year. Tetley Redbush still dominates the rooibos market, with sales up nearly 20%.”
Decaf tea is also a growing market. Attfield comments: “Tetley decaf continues to dominate the decaf tea market. Tetley decaf accounts for more than a third of all decaf sales with 35% share. In convenience Tetley decaf has 49% market share compared to 22% held by its nearest competitor PG Decaf, and in Scotland, Tetley decaf holds 48% market share compared to its nearest competition, Typhoo decaf, with 15% share.”
He says that in the coming year Tetley will continue to offer price-marked and extra free packs and will be executing a programme of activities designed to increase awareness of the Tetley range and drive trial. Key activities include a programme of sampling at events such as Diwali on the Square in October in London.
Tetley will also be taking Tetley Extra Strong to the radio and for the first time advertising its Good Earth brand on television. “This is the first demonstration of our commitment to support our global brands,” says Attfield, “Good Earth already has good distribution. It’s a cracking tasting premium organic range which we believe has a real opportunity in this market.”
In the out of home sector Tetley has shown strong support for wholesalers and independent retailers as one of the key partners in National Cuppa Day which was staged during National Independents’ Week.
In addition, Peter Haigh, Tetley brand development manager for out of home, says: “Tetley runs a full programme of both national and tailor-made promotions which are a key part to underpinning the support we offer to the wholesale sector.
The next one will run for six weeks from the end of September. A customer simply has to purchase two cases of Tetley 2x1100s to receive a free Â£10 Argos or M amp;S voucher.”
Like the retail market black tea continues to be the cornerstone of the out of home market, but Haigh adds: “There is a serious growth in Redbush, Green and Decaf products, all of which are growing at encouraging rates, while our recently launched Tetley On-the-Go case has sold over 1.5 million take away tea kits since April.”
He adds: “The On The Go Case contains 300 Tetley Drawstring tea bags, and 300 Tetley branded double wall cups and non-spill ‘sip lids’ – all in one easy-to-store, easy-to-use package. All you need to add is milk and hot water – it couldn’t be simpler to set up a successful takeaway service.”
Typhoo is encouraging retailers to stock up on the new packs featuring its partnership with charity FDS (Federation of Disability Sport) with endorsement from soccer’s World Cup Winner Sir Geoff Hurst and the Great Britain disabled football team.
The Sports for All project will provide at least 500 community-based sports coaches across the UK to increase participation in sport and ensure disabled people can access the sport of their choice.
New CEO Keith Packer says the charity partnership is testament to Typhoo’s position as a responsible brand. He says he is committed to moving the brand away from gimmicks and its previously celebrity-packed TV advertising to focus on its heritage, emphasising the importance of ‘good honest tea’ and social conscience which has been a part of the company ethos since 1903.
Money from every pack of Typhoo purchased will help the company to fund and support the FDS.
Caribbean food and drink specialist Enco Products is introducing five variants of Caribbean tea – ginger, ginger honey, lemon ginger, peppermint and the traditional, which features the Fair Trade logo – throughout the cash and carry/wholesale/independent sector.
George Phillips, Enco Products commercial director, says: “Each variant has a distinctive, refreshing taste and is really popular in the Caribbean. The individually wrapped bags also ensure that consumers can enjoy the teas at their very best.”
Competition between low calorie variants is helping to drive hot chocolate sales in the convenience channel, with an increase of 8.3% to July 11, according to IRI.
Cadbury stepped up the pressure at the beginning of the year by revamping Cadbury Highlights with a new recipe and packaging design reacting to consumer insight that showed consumers were treating low calorie hot beverages as a chocolate substitute.
Nestlé has notched up sales of Â£2m for Skinny Cow since its launch a year ago and is planning to spend Â£2.5m supporting the brand through the autumn and until January. Graham Walker also points out that its Hot Chocolate Aero product will benefit from Â£7m support for the confectionery brand.