Even though the overall economy is very depressed consumers seem reluctant to give up their hot beverages, helping the category record strong sales with premium products driving the growth. Coffee remains the biggest player and increased its share of the overall category to 47%, while tea slipped back slightly to 36%.
According to IRI figures for the 52 weeks to December 31 for the convenience sector hot beverages were up 3% on the previous year and soluble coffee, the biggest segment, increased by 7.1%, while standard tea dropped back by 2.3%. Roast and ground coffee (R amp;G) was up by 17%, but only has a 6.8% share of convenience, while fruit and herbal tea grew by 14% and green tea was up 22% but from much smaller shares than even R amp;G.
Although regular soluble coffee remains the mainstay of the category, the recent trend towards the premium end is continuing with sales of regular coffee flat while premium is up 13% and super premium increased by 34 %, albeit from a 7% share of the overall soluble coffee market in convenience.
Nestl eacute;’s trade communications manager Graham Walker points out Nescaf eacute; Original and Gold Blend hold the number one and two spots and says that it is crucial that wholesalers ensure they get the regular and premium segments right as they account for 77% of coffee sales.
He says Nescaf eacute; will be looking to attract new and younger consumers and will build on the fast growing Nescaf eacute; 3 in 1 with the launch of Nescaf eacute; 2 in 1 (coffee and creamer without the sugar), which should be ideal for the customers of c-stores served by the wholesale sector.
Nescaf eacute; will also be seeking to re-engage with existing drinkers with the new aroma and new jars for Gold Blend and introduction of refill packs of Nescaf eacute; Original and Gold Blend. He says the refill packs make a major environmental saving because they require 50% fewer lorries per tonne to transport than the glass jars. They are also ideal for smaller stores where space is restricted because they take up much less space than jars.
For the wholesale channel the company will continue to encourage wholesalers to stock the optimum range and to communicate this message through to their customers because there is still scope for substantial uplifts if retailers reduce out of stocks and signpost the category better. It will also continue running price-marked packs on its leading SKUs: 100g Nescaf eacute; Original, pound;2.95; 100g Gold Blend, pound;3.50; Caf eacute; style Cappuccino, pound;3; Nescaf eacute; Original 50g, pound;1.85; and Nescaf eacute; decaffeinated 100g, pound;2.99.
Susan Nash, trade communications manager at Kraft Foods, says wholesalers and their customers need to capitalise on the growth in premium and super premium coffee by ensuring they stock the right assortment. She says that according to Nielsen’s Symbols amp; Independents MAT to 31/12/11 Kenco is the number one premium coffee brand, and Carte Noire is fuelling growth for the super premium sector with an increase of 67%.
Nash says: “Wholesalers should look to stock a good range of bestselling premium brands to help retail customers make the most of a growing sector.”
Kenco is also launching a single serve variant of Kenco Millicano, its wholebean instant coffee launched last year. The new packs contain 10 sticks of Kenco Millicano. Nash says: “Our new packs look fantastic on shelf and bring something new and exciting to the instant coffee category. The single-serve format is perfect for customers wanting to take their favourite coffee away with them, whether it’s on holiday or just to the office.”
In the out of home market Nash says quality and innovation are key. She adds: “Innovation is central to Kenco Professional, and we have established a reputation as a trendsetter within the market. For example, we were the first major hot beverages manufacturer to work with the Rainforest Alliance and we believe that new ideas can create new opportunities for growth.”
John Sutcliffe, convenience, foodservice and independent channel sector manager at Taylors of Harrogate, says: “We have identified the wholesale and convenience channel as a key area for growth for our Yorkshire Tea and Taylors of Harrogate roast and ground coffee brands. Both brands occupy strong and growing positions in the grocery channel and are well positioned to be further leveraged in wholesale.”
Taylors is particularly strong in the R amp;G sector where Nielsen figures for the 52 weeks to October 2011 show it is the number one brand in the market with a 13.6% share and it is also driving market growth with increasing revenue sales of 38% in the last 12 months.
The two best selling branded filter/cafeti egrave;re coffees are Taylors Rich Italian (which grew by 38.6%) and Lazy Sunday (+28%), and Taylors also has the best-selling decaffeinated filter/cafeti egrave;re coffee on the market, Decaff eacute; (+24%). Overall it has eight of the top 20 SKUs across the total market.
In the wholesale channel Taylors is focusing on its number one position in the overall market and is seeking to focus on core ranging and driving distribution. Sutcliffe says: “It is vital that the channel recognises our strength is this segment of the category.”
Paul Freeman, marketing director at Douwe Egberts Coffee Systems, says that as more than 50% of the UK out of home (OOH) coffee market is instant, its freeze-dried coffee range is extremely important. “Our Pure Gold continues to perform well in both the retail and OOH markets, where it is benefiting from consumers’ desire to upgrade their daily coffee experience.
“Additionally, our other key areas of focus are our traditional heartland of R amp;G coffee, and Espresso which, as a category, is out-performing the rest of the coffee sector. Our range of Douwe Egberts Espresso blends are also performing well within the category as they provide just the right choice for those outlets wishing to serve a variety of high-quality espresso-based drinks.
Lyons is another brand looking to cater for the trend towards premium coffee. Elaine Higginson, managing director United Coffee UK amp; Ireland, which owns Lyons, says: “In November last year we re-launched our retail brand Lyons’ coffee to give consumers fresh, great tasting coffee from the convenience of a bag, and three new blends of fresh R amp;G coffee to appeal to all tastes. We are seeing a shift towards quality coffee occasions in the home and Lyons’ coffee bags are ideal for anyone looking for a cup of real coffee, without all the fuss of preparation.”
She adds: “Lyons’ coffee bags aren’t limited to drinking at home. They’re great for operators of smaller commercial environments such as shops, hairdressers, offices and hotels, who want to serve guests great freshly ground coffee without the need for a machine, and make the perfect accompaniment in guest bedrooms.
“It’s early days but the new packs and flavours are already a hit with coffee lovers and are flying off the shelves. And with a 3p donation to The Royal British Legion with every pack sold, our coffee tastes even better.”
In the general market volume tea sales are down overall, but there are positive signs of growth in developing sectors such as green teas, redbush and speciality teas.
Simon Attfield, customer marketing controller at Tetley GB, says Nielsen for the year to 4/2/12 in impulse shows the tea market is worth pound;46m with flat growth of -0.1% year-on-year, with growth of 0.4% value in everyday black tea sales, 0.9% increase in green tea sales and a 23.8% increase in sales of redbush teas.
In terms of volume, redbush teas are the star with volume sales up 31% in the impulse sector, and Attfield says Tetley is a driving force behind this growth with sales of the market leader, Tetley Redbush, up 69% year-on-year in value.
In retail Tetley is the number two tea brand in the overall market overall, and the number one brand in the impulse sector and in Scotland. Tetley has 34.1% volume share of impulse and 47.1% volume share of Scotland.
Tetley is putting resources behind its green tea, and following a marketing campaign to support its green teas with television advertising, poster activity and sampling, in the four weeks to the February 4, Tetley was the brand volume leader in green teas with a 41% share.
Tetley launched smaller pack sizes of its best selling Tetley Pure Green and Tetley Lemon Green teas last year, price-marked at pound;1 and packed in small case sizes of 4×20 trays to offer a low-risk option to trial.
Tetley’s has also renamed its Drawstring brand Tetley Easy Squeeze. Attfield says the new name and pack design will give the brand greater on-shelf presence and more clearly communicate the product benefits of the “clever non-drip, no mess teabags”.
“Tetley will continue to support sales of the overall brand through carefully targeted marketing which will include further high profile television advertising featuring the Tetley Tea Folk,” says Attfield.
“Tactical promotions will continue throughout the year, and will include price-marked packs,” he says. “These are an important promotional mechanic for convenience and impulse stores enabling them to demonstrate value by offering transparent pricing from manufacturer to customer.”
In the out of home (OOH) market Dorothy Sieber, director of business development amp; out of home marketing at Tetley GB, says: “Black tea continues to be the cornerstone of tea sales in the UK and Tetley 2x1100s is by far the most important product within the market. Saying that, there are also key areas of growth. Take Redbush for example. It has enjoyed phenomenal success in retail and this is now being mirrored in the out of home market.” She adds: “Offering a decaffeinated black tea is also essential if you want to keep up with the needs of today’s consumers.”
Sustainability tends to be more important in the OOH market and Sieber says Tetley is a member of the Rainforest Alliance and has Rainforest Alliance Certified packs available in foodservice. She says: “Tetley for Caterers, Non-Drip Drawstring packs are the first ones to contain 100% certified tea, with the entire range changing to 100% before 2016.”
She adds: “Our next main promotion runs throughout April 2012, during which caterers can get a range of George Foreman Grills worth up to pound;100 with a minimum purchase of three cases of Tetley 2x1100s, seven cases of Tetley Envelope 250s or two cases of Tetley On the Go. Make sure you get enough stock in to cope with demand during this strong sales period.”
Unilever’s PG Tips is the number one brand in the overall market. Silvia Grattieri, PG Tips brand manager, says: “In 2011 we introduced The Fresh One, The Strong One and The Delicate One (now renamed The Evening One) as ‘The New Ones from PG Tips’ and our communication objective was to drive awareness of the new range. The launch has proven very successful, generating pound;1m incremental retail sales value for the category in its first seven months. We have also seen new consumers coming to the category, attracted by these new varieties of black tea.
“Now that the products have been in the market for almost a year we aim to establish them as the ‘PG Tips Special Moments range’ to emphasise the moment and consumption occasion as well as related consumer benefit. We will continue to drive growth for the category through the range expansion which offers consumers new, relevant products and choices to suit different tea occasions throughout the day.”
John Sutcliffe, convenience, foodservice and independent channel sector manager at Taylors of Harrogate, says his company is looking to build on its strength in grocery and is targeting the wholesale and convenience channel as a key growth area for Yorkshire Tea. “The channel enables us to target a wide range of retailers, from non-affiliated independents, to symbol groups and retail clubs. There is still a significant opportunity to grow sales in the channel. We are a key player within the hot beverages category now and we will be looking at developing our relationships across the channel as a priority in the next 12 months.”
In the tea category, Yorkshire Tea is the third largest standard tea brand, with value sales growing at +16% year on year and volume sales up 20.9%, according to Nielsen for the 52 weeks to October 2011. Sutcliffe says the smaller format 40s and 80s original blend SKUs are the core, with 40s in growth by 33.2% and the 80s up 23.2% according to Nielsen Symbol for the 12 weeks to October 27. And sub brands are also growing in importance, with Gold 40s growing by 50.8% and Hard Water 80s up 22.8%.
He adds: “Price-mark packs are proven within the channel and we intend to maintain this strategy going forward. The price-marked packs cover our standard Yorkshire Tea range, Hard Water and Yorkshire Gold packs. Additionally, we will continue to support our catering range of bulk 1-Cup and 2-Cup bags, as well as our Enveloped tea packs. Our brands are regarded for their quality and when this is coupled with our ‘everyday-affordable’ positioning, this means we are seeing more consumers moving into our brand. It is important that the wholesale channel recognises the importance of Yorkshire Tea in the category now and how it offers a point of difference in terms of a quality blend and a value proposition. We are the number three branded product with pound;5m investment going into the brand across the next 18 months.”
Typhoo works very closely with the wholesale channel, according to head of impulse Alan Ramsey. He says all the company’s price-marked packs are exclusive to the wholesale channel, and provide wholesalers and their customers with strong margins, and Fresh Brew is an exclusive cash and carry brand.
Ramsey says that Typhoo 80s with a pound;2.29 price mark scored out with a pound;1.79 price mark perform strongly in the channel, along with 40s price-marked pound;1.25, Typhoo Eco Refill 40s price-marked pound;1 and Fresh Brew 80s price-marked pound;1.29.
He says the company takes sustainability very seriously and this is demonstrated by the UK operation which has achieved zero waste to landfill since the end of 2010, 90% of packaging is recyclable, and it is aiming to be carbon neutral by 2015. He says sustainability is particularly important in the foodservice sector with many customers asking for details of companies policies, and all of Typhoo’s foodservice range is Rainforest Alliance certified, and the Ridgways Speciality range, which is exclusively for foodservice, is Fairtrade certified.
Looking ahead, he says the Eco Refill packs will be the focus for promotion in the retail sector and the company will be maintaining its price-marked pack campaign.
Twinings is working to make its range more accessible for wholesalers’ customers. Senior customer marketing manager Jacqueline Chapman says: “To help wholesalers deliver more choice to customers Twinings is now available in smaller pack sizes making the range more accessible, and helping wholesalers increase profits by allowing them to offer their customers a wider range of teas, but reduce stockholding, at no extra cost.”
Chapman says that in the last 12 months, the special teas market has grown in volume by 4.2% while mainstream teas continue to decline (-3.3% volume year-on-year), and because of this Twinings’ most important products in the wholesale channel are Fairtrade, speciality, infusions and green tea.
She says: “At Twinings we are committed to providing our customers with a range of high quality ethical and sustainable teas, and with the introduction of foodservice’s first full Fairtrade infusions offering there has never been a better time to support and profit from sustainability initiatives. Working with Rainforest Alliance, Fairtrade Foundation and the Ethical Tea Partnership, our Fairtrade Jacksons of Piccadilly range and Rainforest Alliance certified Twinings Everyday Tea have been developed to enable wholesalers and their customers to not only stock a full range of ethical teas and trade ethically, but allows them to take advantage of a premium profit opportunity.”
She says Twinings has a bespoke promotional strategy for wholesalers and supports their sales and telesales teams with a range of selling tools.
HOT CHOCOLATE amp; OTHER HOT DRINKS
Kraft Foods works closely with wholesalers to help them maximise hot chocolate sales, according to trade communications manager Susan Nash. She says: “Kraft Foods works closely with wholesale customers to recommend a core range, by sub-categories, based on a rationale of value share and growth performance. It is also important to review and refresh the standard range periodically to ensure it remains relevant.”
She adds: “The importance of the channel for the hot milky drinks category is demonstrated by the fact that Kraft Foods has a share of 52.6% within total impulse, compared to a total coverage share of 33.3%.”
Since the end of 2010 all Cadbury branded hot chocolate packs have been Fairtrade. Nash says: “Cadbury is the largest hot chocolate brand to carry the Fairtrade mark and as Fairtrade is the most recognised ethical label in the UK, it is important for wholesalers to stock ethically sourced hot beverage products as retailers will want to be able to sell them.”
Denise Dewar, commercial director, Horlicks, says: “The total Hot Milky Drinks (HMD) market is valued at pound;130.4m by Nielsen. Despite the mild winter, the hot beverages category experienced strong sales demonstrating it is not only relevant to consumers in the winter but all year round.”
She adds: “In the recent winter season, Horlicks created specific promotional activity on its 200g price-marked packs for the independent channel. This included money-off coupons and the chance for retailers to enter into a prize draw. Retailers should look out for further promotional activity throughout the year in the wholesale channel.
“The Horlicks range has recently introduced a new limited edition Horlicks Light Chocolate Cherry 500g to the successful Horlicks family, demonstrating a continued commitment to existing consumers, as well as bringing new consumers into the brand.”
Pritchitts is a brand that is well known in the foodservice sector due to its sponsorship of the Telesales Achievers Awards. Brian Kyle, head of UK foodservice at Lakeland Dairy Sales, which owns Pritchitts, says the awards generate a lot of goodwill with the company’s wholesale partners.
When it comes to the hot beverages category two of Pritchitts products are most relevant its Millac Cappuccino Milk and its range of one-cup long-life milk portions. Kyle says that one of the strengths of both products is they only require ambient storage. The one cup products Millac Maid mini pots and Luxury Coffee Creamer Cafe Maid can be safely stored in warm hotel rooms, while the Cappuccino Milk can also be stored and used from ambient, meaning less wastage, making it especially ideal for smaller operators such as mobile coffee vans and event caterers with limited refrigeration. Kyle says the Cappuccino Milk also produces a longer lasting foam than ordinary milk, and it reduces wastage to a minimum because unlike ordinary milk it can be foamed more than once.
After the success of its Magic Numbers promotion last year, it has been re-introduced across the entire Pritchitts range and will run through to December 31. Kyle says Pritchitts also gives its account managers discretion to run promotions aligned to wholesalers’ activity, so if a wholesaler has activity aimed at hotels or pubs, for instance, Pritchitts will usually be able to participate.
TOP TEA TIPS FOR WHOLESALERS
To maximise tea sales, Simon Attfield, customer marketing controller Tetley GB, recommends:
Tea tastes can be regional so ensure you are stocking the right brands.
Shoppers are brand loyal, ensure that you offer your retailers a range across the big brands and limited unknown brands.
This goes for promotions as well. Try not to promote the smaller and unknown brands overly or they will clog up your customers’ shelves, limiting consumer choice and making their store less appealing.
Stock different pack sizes, although 40s are an important pack size don’t shy away from the larger pack sizes of 80s and 160s. 160s will last a family of heavy tea drinkers no longer than a week.
Be aware of product trends with the grocery retailers and ensure your customers are aware of them. Even in mature categories like tea, consumer tastes and preferences change, convenience stores need to keep up with these.
Remember it is value and quality customers are after, so look out for price-marked packs and packs offering extra free. These are two very clear ways at fixture the shopper knows they’re getting value.