Instant coffee and tea still account for the majority of sales in the hot beverages sector, but changing consumer tastes and lifestyles are leading to increased competitive pressure on them. The combination of healthier lifestyle trends, increased demand for indulgent products and growing consumer interest in ethical products are all encouraging manufacturers to develop products for the growth areas.
Instant coffee remains the largest segment within the hot beverage sector, accounting for 42%, with 80% of households purchasing it and spending an average pound;28.37 each year. Dominating the retail segment is Nescaf eacute; with Nescaf eacute; Original accounting for 37% of instant coffee sales by volume. Nestl eacute; caters for the growth in indulgent and connoisseur products with its Caf eacute; Style Cappuccinos, its premium brand Nescaf eacute; Gold Blend, and Nescaf eacute; Alta Rica is its connoisseur offering.
Research shows consumers are increasingly buying their coffee in the independent grocery sector with more than a third of coffee purchases made as part of a small basket shop. HIM’s Convenience Tracking Programme also shows that hot beverage shoppers spend two and a half times more than the average convenience shopper, so wholesalers should be encouraging their retail customers to make sure they have the key products consumers are likely to want.
Nestl eacute; Foodservices highlights the opportunity for wholesalers in serving the growing out of home market, which accounts for 3,500 million of the 11,330 million cups of coffee drunk in the UK each year. Marketing director Martin Lines says the company is seeking to work more closely with wholesalers in order to increase sales further. He says: “One area that we’re looking at is a greater sharing of data between suppliers and wholesalers. Knowledge empowers all parties and enables us to find solutions. A total understanding of the category issues is the only way for manufacturers to maximise the category performance.
“For example, we have moved service from 93% to 98.5% with one wholesaler just by sharing data and by having a Nestl eacute; supply person in the wholesaler’s business for a short time.”
When it comes to promoting its products Nestl eacute; Foodservices avoids price-cutting activity because it sees it as eroding the value of the sector and instead concentrates on added value promotions. Lines says: “The creation of exciting promotional activity to engage end-users – and their customers – brings the product front of mind, and channel specific point of sale can help clinch the deal. It’s about the entire supply chain working together to get the right product to the table at the right time.
“We look to exploit current market trends. Indulgence and premiumisation of products encourages consumers to trade up – again delivering for the manufacturer, the wholesaler and their customer. Caf eacute; style soluble beverages such as cappuccino and latte have increased in value by 9.5% year-on-year – almost 5% ahead of the total soluble coffee category growth – so this is an opportunity.”
Kraft’s Kenco brand is another leading coffee range and has just been re-launched with new designs to improve shelf stand out. Sarah Petts, channel and communications manager for Kraft Foods, comments: “Kenco continues to be a top selling brand and we are investing pound;8m into media support throughout 2007. This development aims to improve its visibility within the total hot beverages category, giving it a more modern feel. The new look is in keeping with the overall identity of the brand but it improves standout on shelf to help consumers find their favourite Kenco products.”
Kraft has also made particular efforts to help the c-store sector. Petts explains: “The coffee category was the first product area where we introduced ongoing price-marked packs and reduced case sizes to appeal to retailers who have limited space.”
Included in the range is Kenco Decaffeinated. Petts says: “Decaffeinated products are growing in popularity as more consumers are looking to maintain a balanced diet, including reducing caffeine intake.”
Ethically produced hot beverages are a major growth sector, particularly in the catering and foodservice where many local authorities and students unions insist on Fairtrade products.
Caf eacute;direct is the UK’s largest 100% Fairtrade hot drinks company but the growing number of other companies also offering Fairtrade or other ethically focused hot beverages has lead it to re-evaluate its marketing. This has resulted in it adopting a new visual identity for all its products with a new corporate logo, new strapline and a re-design of its packaging. The new packaging emphasises the relationship between Caf eacute;direct and the growers who produce its coffee, tea and cocoa.
Sylvie Barr, head of marketing at Caf eacute;direct, says: “We are confident that under our new look new users will see Caf eacute;direct as a beacon brand for Fairtrade. Our key strength is our long-term relationship with our grower partners – real people and real quotes are on our packaging and these are extremely motivating to the shopper.”
As part of the emphasis on the Caf eacute;direct brand, Caf eacute;direct 5065 Freeze Dried Coffee will be renamed Caf eacute;direct Premium Instant Coffee.
In the out-of-home sector Caf eacute;direct is also launching some new products. It has extended its tea range with a new Earl Grey variant in 100 taggged, 300 tagged and envelope bag formats. Cocodirect Instant Hot Chocolate has been launched in 1kg packs and 23g sachets. Louise Whitaker, trade marketing manager out of home, explains: “In retail the standard instant chocolate market is growing by 16.7% year on year and is now worth pound;19.8m in sales. These figures are indicative that consumers are looking for high quality chocolate drinks. Our foodservice customers have been requesting an instant hot chocolate and we are delighted to now be able to offer a full beverage solution of coffees, teas and hot chocolates.”
Another long-time supplier of Fairtrade coffee is Percol, which has a wide range of Fairtrade and organic coffees and which is also a backer of the Coffee Kids charity which helps the families of coffee farmers.
Percol managing director Brian Chapman, who founded the company, comments: “Coffee is becoming more like wine with drinkers becoming more discerning. We have found that people are increasingly interested in where their coffee comes from as they are more influenced by Fairtrade and the desire to be a responsible customer.”
Kenco has also won a major contract in the catering sector providing all McDonald’s coffee from Rainforest Alliance certified farms. The Rainforest Alliance is an independent international organisation and the deal means more than 113,000 cups of coffee consumed every day in McDonald’s restaurants will be made from beans grown with sustainable farming techniques.
The tea category also generates huge sales approaching pound;540m a year with nine out of ten UK households buying tea on a regular basis. Like coffee, tea is a big seller in the independent sector, and Simon Attfield, customer marketing controller for Tetley, suggests wholesalers should encourage their customers to try larger packs. He comments: “Traditionally the independent retailer has offered the smaller 40s and 80s tea packs, but our experience shows that 160s sell very well through the smaller convenience stores and are a great opportunity to put more cash in the till.”
The growing awareness and interest in health issues among consumers is helping to drive some of the growth areas in the tea category such as decaffeinated tea and fruit and herbal.
Decaffeinated teas account for only 2.4% of total tea sales in c-stores, but achieved year-on-year growth of 20.9%. Attfield says that one of the barriers to more people drinking decaffeinated tea used to be the artificial taste, but he believes Tetley solved the problem when it re-formulated Tetley Decaf, and it is the biggest seller with 61% of the market.
He adds: “The increased interest in higher margin fruit and herbal teas presents real opportunities for cash and carry and wholesalers. By offering a wider choice of teas their customers can capitalise on this important growth area. Careful selection of the variants selected is essential to tempt trial.”
New for this year, Tetley has launched its Tetley Extra Strong brand to the convenience sector. The new line is available in cash and carry and wholesalers. Tetley Extra Strong is available in 80s soft pack; shrink wrapped in 6s to minimise stock holding.
Attfield says: “Our research showed that 40% of UK consumers have a preference for a stronger tasting cup of tea and Tetley Extra Strong delivers the full taste these consumers are after without the need for extended brew times or double quantity bag use.”
Tetley has also introduced Redbush, which is brewed from a plant grown in South Africa and contains no caffeine. Attfield says: “Tetley Redbush is one of the healthiest drinks you can enjoy; we want to ensure that this message gets through so have made the health messages a key part of the front of pack.”
Priced at pound;1.69 for packs of 40 bags, in a case of six in a shelf ready tray, Redbush will be supported by a pound;2.2m marketing campaign including advertising, in-store promotional activity and a national sampling campaign.
Unilever is looking to drive growth in normal tea with an pound;18m media spend featuring comedian Johnny Vegas and Monkey backing its PG Tips brand and new look packaging. In addition, this month it is launching a promotion offering a free monkey in special packs of PG Tips 160s
The company says price-marked 40s and 80s packs worked well to allay consumer fears that convenience stores were overpriced. Continuing this trend for 2007 Unilever is introducing price-marked packs for PG Tips Decaf. Carolyn Juvanon, customer marketing manager for the convenience sector, adds: “We have learnt that the best way to engage cash and carry customers is to build awareness of deals running in cash and carry and focus on building awareness of the deals through displays in depot and targeted retailer direct mail and telesales communication.”
Like Tetley, Typhoo is emphasing the health-giving properties of tea. Sue Jones-Smithson, channel marketing manager for Typhoo, explains: “There is a real interest in healthier teas and also in teas with new and exciting flavours, which has fuelled growth within the tea. The segment that has experienced the largest growth in value, in the convenience sector, is Green Tea which has grown at 47% in the last year.
“To cater for this demand, cash and carries should offer Typhoo Green Tea Blend to their customers. Created by combining green and black teas and drunk just like a normal cup of tea, it offers all the benefits of green tea, which is renowned for its anti-oxidant properties, providing consumers with a healthy lift.”
For caterers, Typhoo’s Catering Range is available in one-cup, two-cup and half gallon tea bags, as well as string tag, and string tag and envelope formats, to ensure caterers can provide for all customers’ needs. Jones-Smithson adds: “We have a range of NPD and promotional plans for 2007, each specifically targeted by channel. In particular, we have an innovation programme in place to bring other variants of the Typhoo range, such as Fruit Herb, Green Tea and Decaffeinated Tea into the cash and carry and wholesale channels.”
Twinings has developed a reputation as market leader in the infusions and green teas markets, but is also growing sales in the catering sector with its Everyday Tea. Chris Phillips, business unit head: out of home and impulse markets, says: “Twinings Everyday Tea has seen a growth of 57% in 2006 and is increasingly the mainstream tea brand caterers turn to for quality assurance. Using an earlier flush of tea for a better flavour, Twinings Everyday Tea gives caterers the opportunity to improve the quality of mainstream tea served and offers a premium profit opportunity as consumers are prepared to pay a premium price for the brand.”
There is also a new addition to Twinings’ foodservice range. White tea is rapidly growing in popularity and Twinings has launched Pure White Tea and White Tea Pomegranate.
Hot Chocolate/Hot Milk drinks
The hot chocolate market is worth more than pound;73m a year and is experiencing a growth in activity. Cadbury has taken back responsibility for sales and marketing of its branded drinks from Premier Foods and is investing in its range while Nestl eacute;’s Aero Hot Chocolate built an 18% share of the out of home market 15 months after its launch.
Mike Tipping, head of customer relations for Cadbury Trebor Bassett, says: “This is a sizeable market. We drink more than 800 million cups of hot chocolate each year in this country and CTB brands are consumers’ number one choice. Through investment we aim to increase the number of people buying hot chocolate, frequency of purchase and spend per trip, to significantly grow the category.”
Nestl eacute; claims credit for returning the out of home market to 2.8% value growth from a 7.7% decline at the start of the year. Nestl eacute; FoodServices marketing director Martin Lines says: “The launch of Aero Instant and Aero Add Hot Milk gave consumers a reason to revisit the beverage and presented an attractive hassle-free profit opportunity for caterers.” Having established itself in the foodservice sector the original and mint varities have now been launched in the retail sector and Nestl eacute; claims 60% of sales have been incremental to the hot chocolate category.
Horlicks is looking to drive growth by replacing its twin sachet format with a new single stick pack. The launch of the stick pack will also be supported by Horlicks’ pound;4.2m marketing campaign in 2007. New shelf-efficient merchandising has been created to meet retailers’ needs, and Alex Pettigrew, senior brand manager for Horlicks, says: “In particular the compact format is set to drive growth in the convenience sector.”
=== Cappuccino Milk guarantees foam ===
Pritchitts says its Cappuccino Milk is going from strength to strength with wholesalers since it was launched nine months ago. The milk, which makes it easier to achieve the perfect cappuccino and latte by guaranteeing consistent foam, has the same taste as fresh milk, and can also be used in other milky drinks such as hot chocolate and milkshakes. It can be stored and used at ambient temperature, eliminating the need for daily orders of fresh milk to be delivered to operators.
Simon Muschamp, head of marketing at Pritchitts, comments: “Millac Cappuccino Milk has been extremely well accepted by the trade and is gaining new listings all the time, which is helping with distribution. It’s still early days but we have further plans this year to raise the profile of this innovative product.
“The increasing demand for espresso-based coffees and the consistency of this product is fuelling its growth. Millac Cappuccino Milk is now being used in a range of machines from bean to cup and traditional barista operated espresso machines to free-standing vending machines, and across all sectors of the market from coffee shops and cafes to hotels and restaurants.”
Millac Cappuccino Milk is available in one litre slim Tetra Pak cartons in cases of 12.