Hot beverages is a vibrant category for the wholesale channel with performance well ahead of the major multiples. IRI’s value sales for the independent sector for the 52 weeks ending 4/12/10 show total hot beverages value at pound;194.3m up 4.5%, and the key categories were soluble coffee with 41% value share and tea with a 36% value. Hot chocolate and ground coffee had much smaller shares at 6% each but had strong growth of 12% and 14.5% respectively.
This strong performance is attracting manufacturers who are already active in the channel to put in more support behind their brands, and also encouraging newer entrants to make the channel a priority.
Nestl eacute; is the biggest player with its coffee and hot chocolate brands, but trade communications manager Graham Walker reflects what many other companies are saying about their strategies when he says: “Wholesale makes up 14% of total sales, and is growing ahead of the major mults, with a stunning performance from premium coffee, so it is absolutely a key priority.”
He adds: “The latest Convenience Tracking Programme shows that in a typical convenience store the average hot beverages shopper spends pound;8.85 and buys an average of 5.1 items compared with the average shopper who spends pound;5.31 and buys an average of 2.7 items, so if retailers are able to recruit new hot beverage shoppers they will find they are also buying more categories.
“This is a message we need to get across to our retail customers and we need wholesalers to help us to communicate this, because retailers trust what their wholesalers say.”
Soluble coffee remains the undisputed leader of the category with Nescaf eacute; Original as the number one brand, but it has seen a fall of 2% in its value share with a strong trend in convenience towards premium coffee.
Premium, where Gold Blend is positioned, is up 9% in convenience compared with 3.3% for the total market, and super premium where Nestl eacute; has Alta Rica, is up 38.6% versus 11.8% in the total market. Nestl eacute;’s caf eacute; style Cappuccino is up 27%, and Walker says 750,000 consumers were new to buying caf eacute; style in the last year.
He says: “This shows wholesalers and their customers are really capitalising on the growth in premium coffee, but the size of the market when compared with the overall market shows there is still plenty of room for growth.”
However, he adds: “It is critical to get regular right because although it is down 4.9% it is still 43% of all coffee sold in convenience. When premium is added they account for 78% of coffee sales in convenience. Nescaf eacute; Original and Gold Blend hold a combined market share in convenience of 53% so get these two right and soluble coffee will perform extremely well.”
The latest addition to Nescaf eacute;’s range is its 3 in 1 sachet containing coffee, whitener and sugar. Walker says it is aimed at attracting a new younger audience to the category and to cater for consumers who are lighter coffee drinkers.
He adds: “The single sachet with an RRP of 25p, is perfect for the impulse sector. It is being supported by TV advertising and sampling which will take in student hot spots.”
Nestl eacute; is also supporting the channel with price-mark activity, with Nescaf eacute; Original 100g price-marked at pound;2.69, Gold Blend 100g at pound;3.19, and caf eacute; style Cappuccino at pound;2.59 for a pack of 10 sachets.
Kraft has highlighted the ethical stance of its Kenco brand with Rainforest Alliance certification for all of the beans sourced for its Kenco freeze dried coffee and Kenco core roast and ground range (Kenco Westminster Medium Roast, Kenco Sustainable Development Medium Dark Roast and Kenco Italia Dark Roast).
It is also looking to exploit the trend towards super premium coffee with its Carte Noire brand. Steve Mounty, director of convenience and distributive at Kraft Foods UK, says: “Stocking the right super premium products helps convenience retailers to take advantage of changing customer needs and emerging coffee drinking trends. Retailers with limited space should focus on brands that their customers know and trust to make the most of the market.”
Within the Roast amp; Ground category Taylors is the number one brand in the total market and is looking to expand its presence in wholesale, with its two best selling branded filter/cafeti egrave;re coffees Taylors Rich Italian and Lazy Sunday growing at 10.4% and 10.8% respectively, according to Nielsen Symbols 12 weeks to 22/01/11.
John Sutcliffe, convenience sector manager, says: “We are seeking to focus on core ranging and driving distribution across the wholesale channel. It is vital that the channel recognises our strength in this segment of the category.”
When it come to out of home products, Bruce Alexander, sales director at Nestl eacute; Professional, says: “Knowing how important sustainability is to our customers, Nestl eacute; has endeavoured to create shared value for all; integrating sustainability as a fundamental business practice throughout its operations.
“We see Fairtrade certification as an important step on the sustainability journey, but it’s only one part of our overall commitment. In reality our work goes much wider. On the beverage front, the Nescaf eacute; Plan goes ‘beyond the cup’ and delivers value throughout the coffee lifecycle from bean to cup.
“This means a pound;200m pound investment over 10 years. As part of the plan, all directly purchased green coffee will meet the internationally recognised 4C sustainability standards by 2015 and Nestl eacute; will distribute 220 million high yield, disease resistant coffee plantlets to farmers by 2020.”
Ashley Neal, director of sales at Kraft Foods UK, says: “Kraft Foods is helping customers get the most out of their premium coffee sales this spring offering a new Money Back Guarantee on Out of Home (OOH) packs of Kenco Freeze Dried.
Kenco is now offering a money back guarantee until 28/2/2012 on its 750g Smooth and Rich, 500g Smooth and Decaffeinated tins and its Smooth and Decaffeinated Stick cases to prove how confident it is that wholesalers’ customers will ‘Believe in the Taste’.”The promotional packs which will also feature new Kenco branding will enable wholesalers’ OOH customers to purchase a tin or stick case to try, then, if they are not completely satisfied, return it to Kenco for a refund.
Neal adds: “We’re confident that your customers will love the great taste of Kenco coffee. It’s massive success last year shows just how much people bought into the quality of the brand in 2010, and our money back guarantee proves our belief in the taste.
“Kenco has formats suitable for a wide range of audiences, from offices to hotels and from hospitals to sports clubs, so everyone can take advantage of the offer. It’s a no-risk investment if the people who drink our coffee aren’t happy, we will take the hit.”
As with coffee there is a long time leader, in black tea, but consumers are growing more adventurous in their tastes with growing demand for green tea and red bush varieties.
Alistair Kieran, business sector controller for convenience and cash and carry, for Tata Global Beverages, producer of Tetley tea, says that black tea accounts for about 80% of the overall market, but in the independent sector it is around 90% of the market and this means opportunities are being missed. He says: “We are keen to educate the trade about the need to give the customer choice and to get the balance right. Green tea is worth about pound;28m but in impulse it is tiny. We are looking to expand green tea and red bush to be pound;50m- pound;60m categories in five years. It’s all about driving distribution. Consumers will be looking for them in their local stores. Obviously there is not room for a selection in local stores but they just need one SKU of green tea and red bush to give consumers the right perception.”
Tetley provides a range of support for the wholesale sector with sales teams visiting cash and carries to help them with range, POS and promotions, and with its sponsorship of National Cuppa Day. Kieran says price-marked packs are key for black tea, while driving variants with cross promotions and link saving with complementary products. In the wider market the Tetley Tea folk have returned with new adverts to come and Tetley will also be highlighting Rainforest Alliance certification on pack.
Tetley is the leading tea in wholesale, but in the overall market PG Tips is in the number one position. It started the year with a new TV advertising campaign focusing on the ‘Coming Home Cuppa with a total media spend of pound;3.4m. This has been followed this month by the launch of the ‘New Ones. The new range of The Fresh One, The Strong One and The Delicate One, will be backed by a marketing campaign of pound;3.5m in the first six months and a pound;12m marketing campaign across the first three years. The campaign will consist of TV, print, sampling and in-store activity.
Yorkshire Tea is growing by 22.3% in the wholesale channel in value terms, as solid consumer demand nationwide helping to drive sales up. In terms of product performance, the smaller format 40s and 80s original blend SKUs are the core. The 40s are in growth by 33.2% and the 80s are growing by 23.2%, according to Nielsen Symbol 12 weeks to 22/01/11. The sub brands in the portfolio are also growing in importance, with Gold 40s growing by 50.8% and Hard Water 80s growing at 22.8%.
John Sutcliffe says: “Price-marked 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. 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 and we are now back on TV with pound;5m investment planned across the next 18 months. The new campaign focuses on Little Urns journey across the USA, as he tries to bring a ‘proper brew’ to expats abroad.”
Typhoo is another household name in the hot beverages category. Andy Martin, channel manager for convenience and discounters at Typhoo, says: “The wholesale channel is more about people. We have our team backed up by an external sales force going into wholesalers and making sure the stock is there and upselling. Our relationship with wholesalers is more about investing in sales out rather than sales in, reaching the retailers and caterers through the wholesalers and working on expanding distribution to them.”
Typhoo is another manufacturer offering price-marked packs. He adds: “Extra percentage free is a better way of driving additional sales than money off because price cuts result in smaller profits for independent retailers and wholesalers.”
When it comes to catering, Kieran says that out of home is dominated by coffee. People are often suspicious of tea because they have had bad experiences in the past There is a need to offer a branded solution so that people see a brand that offers a taste they trust and a branded cup is one way of doing that.
He says promotions also have to be adapted to the differing needs of delivered wholesalers and cash and carries . He says: “In delivered we use both price and value added promotions such as a tea towel promotion, but in cash and carry we concentrate on price because value added doesn’t work so well.”
Hot chocolate and milk drinks
While the market research companies vary on the exact size of the market in the wholesale channel, they all agree that hot chocolate and milk drinks have had a good year and that Cadbury hot chocolate is the leader.
In autumn 2010, Cadbury revamped its Cadbury Drinking Chocolate, Cadbury Instant Chocolate, and low calorie Cadbury Highlights with a modern pack re-design including the Fairtrade mark for the first time.
Susan Nash, trade communications manager at Cadbury UK, says: “Within hot beverages specifically, the strongest performers are Fairtrade products, with Fairtrade hot chocolate up +45% volume year on year. Cadbury is now the largest Hot Chocolate brand to carry the Fairtrade mark and as Fairtrade is the most recognised ethical label in the UK, it is increasingly important for retailers to be aware of, and stock a comprehensive range of ethically sourced hot beverage products.
In January 2011, Cadbury Highlights helped retailers to maximise hot chocolate sales with a six figure consumer marketing campaign during the key New Year sales period. Activity in women’s press, radio and online platforms, championed the brand’s 40 calorie content.
At Nestl eacute;, Graham Walker says Aero hot chocolate has outperformed the marketed, and benefits from the halo effect from advertising on the confectionery brand. He says Aero confectionery will have its biggest ever support this year and this is sure to keep the hot chocolate drink in growth.
Horlicks has also seen strong growth in the wholesale channel, and this winter GSK invested pound;3m in a new ‘Made For Evenings’ campaign that included TV advertising and an on-pack promotion. The campaign was designed to encourage consumers to reclaim their evenings and unwind by drinking Horlicks.
In the Bestway group last year tea sales were slightly up. However, the last three months have seen strong double-digit growth. Both Tetley and PG are up, there is some price inflation but Tetley has performed strongly in recent months it could be the return of the Tetley tea folk!
Coffee is performing slightly behind tea year on year. The fastest growth in our business has come from Douwe Egberts, which followed Kenco with a promotional pound;2 price-marked pack. This mechanic has worked very well for both brands. Gold Blend and Lavazza roast and ground are also performing well with us.”
Major supermarkets have driven deeper and cut deals on bigger pack sizes in an effort to give consumers the deals they are looking for and protect their own turnover. However, often consumers are reluctant to trade up and can be better tempted on a decent deal on 80s or 40s. Bestway offers an ongoing programme of activity on all leading tea brands.
All major brands are price-marked now. Generally they are competitive with the market, which is key to the long-term success for a price-marked pack (PMP). Both retailers and consumers like to see PMPs.
We offer an ongoing programme of activity on all leading tea and coffee brands. Bestway and Batleys this month begin the 35 Drive promotion, the biggest and best ever of its kind celebrating the Bestway Group’s 35 years in business. As part of this event, the year will feature many spectacular deals, including cash back offers on already top price reductions.
PG Tea bags and Kenco are Rainforest Alliance certified and Cadbury Drinking Chocolate has also recently got Fairtrade status. We fully support the major brands which are taking on the Fairtrade philosophy and think it is good for their brand and of course those communities directly dependent on food production. However we struggled with some dedicated “Fairtrade” brands, probably due to space limitations in our customer base.
The Today’s Group has traditionally always performed well in this growing category and outperforms competitors with various suppliers. For example the tea category finished the year with a very healthy performance, achieving double digit growth with all top four suppliers.
With Tata Global Beverages (Tetley) undergoing its re-branding at the end of 2010 and with its new TV adverts, this has encouraged black tea drinkers to expand into other categories such as Green Tea and Decaf within the Tetley brand.
Nescaf eacute; 3 in 1 was the largest launch in 2010. All Today’s Group 1 members now stock the range, which will also be supported by additional TV advertising in 2011. Another new product development was the launch of the eco-refill pack by Kraft Kenco in the 100g price-marked pack (PMP).
The products that have performed well are Nescaf eacute; Gold Blend and Kenco coffee, and Typhoo, Tetley and PG Tips tea. The only product currently in long-term decline is loose leaf tea.
Today’s Group members receive a great deal of support in terms of price and promotions from Tata Global Beverages and Nestl eacute;. Currently our strongest promotions are Kenco eco-refill pack 100g PMP pound;2.69, which is being featured on promotion at pound;2, Tetley 80s PMP pound;2.29, which is also being promoted at pound;2, Nescaf eacute; 100g PMP pound;2.69, on promotion at pound;2.19, and Nescaf eacute; Gold Blend PMP pound;3.19, which is being featured on promotion at pound;2.69.
Surprisingly, considering consumers are cash poor, Fairtrade products are up 12% year-on-year. For the first time this year the Today’s Group produced an A4 flyer sheet to support Fairtrade Fortnight. The hot beverage category was featured on the leaflet by highlighting Cadburys Drinking Chocolate 250g PMP pound;1.49 and Tetley Good Earth Tea 80s. Kenco has also launched a pound;9m marketing campaign about sourcing its beans from Rainforest Alliance Certified Farms.
The dairy angle
“Milk is often what determines a good hot beverage experience and as a market leader in dairy, Pritchitts invests heavily in research to ensure that its Mini Pots are easy to open and use, guaranteeing there is no unnecessary spillage or costly product wastage,” says Simon Muschamp, head of marketing at Pritchitts. “Most importantly, our products are developed to deliver a great taste to complement and enhance the beverage offering.”
Pritchitts has a range of products to meet hot beverage needs, including its long-life products, Millac Maid and Luxury Coffee Creamer Cafe Maid.
Muschamp adds: “Pritchitts’ sales force works closely with wholesalers to ensure that they are supported when selling our product. We offer support literature and briefings to ensure they understand the key selling points. We also work with wholesalers to communicate to their customers via their magazines and online, offering added-value support items such as recipe books.
“Pritchitts also sponsors the annual Telesales Achiever Award which recognises the business contribution made by people working in telesales departments of wholesalers nationwide.”