While cash-strapped consumers are putting off larger purchases they appear to be consoling themselves with growing amounts of coffee, and the independent sector is the main beneficiary of this trend.
According to Nielsen for the year to November 1, the overall hot beverage category was up 1.1%, but convenience was up 4.6%. Drilling deeper into the figures shows that instant coffee was up 1.3% in the multiples, but in convenience it was up 9.2%.
Nestl eacute; dominates the coffee sector and UK trade communications manager Graham Walker says it appears that during the economic downturn consumers are choosing to have special coffee at home rather than paying coffee shop prices out of home.
Within instant coffee the most indulgent areas are showing the strongest growth with connoisseur coffees such as Alta Rica up 28%, speciality, which covers Nescaf eacute; Cappuccino and Latte, up 10%, and Premium (Gold Blend) up 11.7%.
To capitalise on this trend Nestl eacute; is planning to spend pound;24m to support Nescaf eacute; during 2009. Walker says: “This will include a new campaign to underpin its iconic status and to reinforce its continued commitment to the instant coffee category.”
The first airing will be this month supporting Nescaf eacute; Original and further campaigns will follow throughout 2009 to support the whole range including a “breakthrough innovation” of the Nescaf eacute; brand. He says this sort of backing should give delivered wholesalers and cash and carries confidence to get behind Nescaf eacute; because of the benefit it will deliver to their customers in terms of sales.
For independent retailers and their wholesalers during 2009 there will be strong focus on a core range of products:100g Nescaf eacute; Original, 100g Gold Blend, Nescaf eacute; Cappuccino sachets and 100g Nescaf eacute; Original Decaffeinated. Walker adds: “Our aim is to secure distribution and display of those four SKUs and we will be communicating that message to the retailers through the trade press and through the wholesale channel.”
Commenting on the Out Of Home (OOH) sector, Martin Lines, marketing director, Nestl eacute; Professional, says: “There can be no doubt that 2009 will be challenging for the foodservice sector and this will inevitably impact on the wholesale market. Though the full extent of the recession remains to be seen, a continued downturn is anticipated in the short term. A likely effect is that consumers may choose to opt for more cost effective options. This puts pressure on the entire foodservice chain, starting at the point of wholesale.
“If we take the hot beverages category: we anticipate that both the profit and cost sectors will be looking for added value (and opportunity) from their hot beverage solutions. We believe customers will remain loyal to those who continue to deliver both quality and value – two core principles at the very heart of Nestl eacute; Professional, and the very reason why Nescaf eacute; remains one of the leading brands within the wholesale arena. As a partner supplier, it’s all about ‘shared value’ and working closely with wholesalers as well as the end caterer to ensure that this value truly supports their business.
“The Nescaf eacute; ‘Go Large’ promotion is an example and one which endeavours to improve the perceived value of hot beverages to the customer. The whole concept behind this promotion is about aiding the retention and growth of end user loyalty – as well as lifting margin points and volumes for the caterer.”
Olivier Kutz, brand manager, Douwe Egberts Coffee Systems UK, says that while its volumes have not been affected by the economic downturn, consumers appear to be adopting a ‘back to basics’ approach so they can still justify and enjoy a daily coffee.
He says: “The trend seems to indicate consumers are placing greater emphasis on value for money options (lower cost, yet still high quality). This is where non-specialists, often the cash and carry customers, can really benefit. By offering a good quality, trusted brand coffee like Douwe Egberts, at an accessible price, they could secure a loyal customer base, which will stand them in good stead.”
Douwe Egberts main products in the wholesale channel are Pure Gold Instant tins (available in 1kg, 750g and 500g), 20 x 60g Douwe Egberts roast and ground sachets (traditional blend) and Douwe Egberts espresso beans.
Kutz says: “We have really only just launched tins into the wholesale channel but they are working very well and in-line with our expectations. There was a clear gap in cash and carry channel for a mainstream coffee brand. Many carry a value product (own label) and a mainstream brand (Nescaf eacute;) but almost none have a premium mainstream offering. This was a clear opportunity for cash and carry operators to use the Douwe Egberts brand to grow their category while minimising risk and potential sales cannibalisation. Our espresso beans are a very strong seller in the cash and carry sector and we expect the same success for our instant coffee tins.”
Douwe Egberts has also worked with Booker to promote its coffee pods and Senseo coffee machines. The offer allowed customers to buy one of the Senseo Professional machines for pound;1 (RRP pound;49.99) following a purchase of any four Douwe Egberts coffee pods.
Kutz adds: “We have major plans to drive our products much more through the cash and carry and wholesale sector (mainly cash and carry). Our aim this year is to bring our cash and carry product portfolio in-line with our retail offering. What’s more, 2009 will also see us expand our partnership with UTZ Certified, leading to our entire product range eventually becoming 100% sustainable.”
Kraft Foods is using price marks to drive sales of its Kenco and Carte Noire coffee ranges in independents. The Kenco Rich Roast and Smooth Roast variants will be available in limited edition pound;2 price-marked 100g jars, compared with a normal RRP of pound;2.89, while Carte Noire is available ongoing in pound;3.39 price-marked 100g jars on a six-for-five case promotion.
Carte Noire is growing 18.6% in the convenience sector, according to Nielsen Total GB MAT for the period ending December 13 2008, with Kenco growing at 9.8% and worth more than pound;103m.
Jack Pipe, convenience sales director at Kraft Foods, says: “In challenging times, retailers need to concentrate on stocking products that continue to show strong growth, and Kenco and Carte Noire fit the bill perfectly. “Price-marked products give customers reassurance that they’re getting a fair price, which makes them more likely to pick up the product. These promotions give convenience retailers the opportunity to stock leading products at even better prices, and to offer great value to their customers on the brands they love.”
While value for money is the top priority of most consumers, health concerns and ethical issues are also important to many. Nescaf eacute; has addressed health with decaffeinated coffee and Skinny Cappuccino and Latte, while Twinings has introduced low calorie Options Caf eacute; Coffees. To support the launch Twinings created a bespoke promotion for Bestway Abbey Road. Bestway customers were entered into a prize draw to win electronic gadgets such as a PS3 and the new ipod Nano with every case of Options Caf eacute; Coffee purchased. The promotion was marketed in depot with a banner and posters as well as at the till with competition forms and a drop box.
For customers interested in the ethical dimension, the latest addition is Aimia Foods’ 500g tin of Buendia Colombian Coffee for catering outlets.
== Tea ==
Simon Attfield, customer marketing controller, Tetley GB, says: “As a staple shopping item consumers will continue to buy tea, but will be on the lookout for better value, so price-marked packs and extra free will be more important than ever to support sales.
“Attention should be given to the right selection of pack sizes. For those with an eye on bottom line price 40s will remain important, but space for 80s and 160s will continue to be important for families and volume tea drinkers.
“Throughout the year visibility of brands and consumer confidence in the quality of these brands will be essential to sales. Tetley will have price-marked packs and extra free offers throughout the year, supported by in-pack sampling and high visibility presence on TV.”
The company will also be demonstrating its support for the wholesale and independent retail sectors with its sponsorship of National Cuppa Day on June 3.
Neil Manders, sales director, Twinings, says: “At around 2-5p per cup, tea is a great value beverage. In terms of the market, the out of home sector may slow down as consumers look to cut back on spend but as a result wholesalers and cash and carries should flourish as in-home beverage consumption increases. Twinings’ premium range of teas is ideally positioned for this as it makes the perfect low-cost treat for the home.”
Manders says Twinings Everyday Tea is the fastest growing mainstream tea at 18.6% (Nielsen MAT for the week ending October 4 2008).
He adds: “We support our range of hot beverages with investment in promotional activity at key selling seasons, and this will continue throughout 2009 including a bespoke wholesaler promotional strategy (see Options Caf eacute; Coffees above). As a matter of course we also support their sales and telesales teams with a range of selling tools including core range product recommendations by channel, and features and benefits of the Twinings range to sell in to end-users. We also offer POS support with our Business Builders portfolio which contains a dedicated wholesaler POS section that can be tailored to meet their needs.”
Wholesalers tend to concentrate on the mainstream tea brands, but the perceived health benefits of fruit and herbal tea, and ethical credentials of Fairtrade tea are helping to boost growth in these sectors.
Rooibos tea has seen strong growth and the pioneer in the sector, Dragonfly Tea with its Tick Tock brand, is still experiencing double digit growth despite the recession. Dragonfly chairman Bruce Ginsberg says: “Tea is a dynamic, buoyant, but very busy sector. Wholesalers should concentrate on brands and tea categories that are driving the growth, working with suppliers that have a record of successful innovation and brand building.” He adds: “Given the variety of wholesalers and their customers, Dragonfly and Tick Tock heavyweight promotions are tailored to individual wholesalers. With millions of drinkers, Dragonfly and Tick Tock teas benefit particularly well from wholesale price promotions to retailers, combined with price promotions or free stock to consumers.”
== Hot Chocolate ==
One of the busiest hot beverage categories in terms of new launches is hot chocolate, which has seen increasing competition in the mainstream, and a proliferation of low calorie products offering indulgence without worrying about putting on weight.
Cadbury is revamping Cadbury Highlights, its low calorie drinking chocolate, with a new recipe and packaging design. Kate Harding, trade communications manager for Cadbury, comments: “The Food Beverage category is experiencing growth at +3% and drinking chocolate is growing ahead of the category at +5%. Cadbury Highlights is currently worth pound;11.3m and we see a real opportunity to drive sales even further for our customers by investing in the re-launch.”
Aimia supplies Galaxy Instant and Galaxy Bliss Hot Chocolate in both catering and retail formats to the cash and carry sector and planned launches this year include Weight Watchers hot chocolate in a jar and a new range of flavoured hot chocolates in individual stick format. Carys Delve, category marketing manager at Aimia Foods, says: “Despite the current economic environment, some markets are still experiencing growth, so wholesalers should be able to take advantage of where consumer spending is slowing the least. For example, instant hot chocolate is now worth pound;80m – a growth of 2% (Nielsen for the week ending November 13 2008), so we believe that products in this category are a good target for increased promotional activity. This trend demonstrates that while consumers are tightening their belts, they are also continuing to spend on products which fit into their time-poor lifestyles.”
Catering for the indulgent end of the market Twinings has launched its Swiss Chocolate Drink. Sales director Neil Manders says: “When it came to choosing the real chocolate in our drink, Swiss chocolate was an obvious choice as it has a similar positioning to Twinings in terms of quality.” It is available in a 350g tub designed to stand out on shelf.
Nestl eacute; is seeking to bridge the gap between indulgence and health with the launch of Skinny Cow hot chocolate.Graham Walker says: “Skinny Cow ticks the boxes for indulgence but it also appeals to another trend – health. Sachets are only 29p and can take independent retailers into a new area. During 2009 the brand will receive pound;1.7m support.”
== Milk and fruit drinks ==
Quoting Nielsen data from June 14 2008, Horlicks says it is the leading brand in the hot milk drink sector with a 23% market share worth pound;28m. It has added a low calorie Extra Light version and says its current objectives are to increase frequency of consumption among core brand users and to increase penetration of Horlicks Extra Light.
Vimto is also claiming a share of the hot beverages category, according to Emma Hunt, Vimto senior brand manager. She says: “Sales of soft drinks are inevitably higher in, but not limited to, the summer months. And research shows a high proportion of consumers drinking Vimto dilute as an alternative to tea and coffee during winter. Vimto is an exceptionally versatile drink, delicious served both hot and cold, so during the wintry nights, a hot mug of Vimto is a tasty alternative at the end of the day. Its distinctive aroma and unique blend of fruit juices are amplified when served hot.”
Hot Apple, a hot fruit drink which has been available in Canada for 20 years, is now available in the UK through Newcastle-based J-Plus UK Limited. The drink is available in Original (Apple Cinnamon), Cranberry, Maple and Pear flavours in 23g sachets and 553g tins and aimed at both the home and out of home sectors.
Managing director Stuart Hall says: “Many consumers, especially in impulse outlets, regard a healthier hot drink alternative to tea and coffee as an essential choice, especially when they have sampled the great taste of Hot Apple.” He says to encourage customer trial, Hot Apple will be supported by heavy trade promotions.