Brewing up big profits in retail and foodservice Changing times for UK hot beverages but tea remains our first love

Britain has been a nation of tea drinkers since the eighteenth century, but our tastes are widening, with coffee shops supplying the morning fix for millions of us and growing numbers of tea loyalists looking for variations on the classic ‘cuppa.’

A reading of the market researchers’ leaves shows that tea, or to be specific black tea, still dominates volume sales and teabags remain the hot beverage suppliers’ core offering. But talk to the household name suppliers and it turns out they are also actively developing products in other segments like green, fruit/herbal and speciality tea, and bringing out teas to drink with alternative milks.

And then there’s coffee. The coffee drinking habit is deeply ingrained among us Brits, who consume 95 million cups every day. On top of that 80% of households buy instant coffee for in-home consumption, led by the over 65s. And out on the high street, café culture continues to boom, with 80% of people who visit coffee shops doing so at least once a week and one in six visiting every day.

Ground coffee and single-serve coffee pods are becoming increasingly popular, particularly amongst millennials. Regiments of 18-35s are turning their backs on the cigarettes and alcohol that kept their parents going and now depend instead on coffee and other hot drinks and social media.

It’s good news for the retailers and wholesalers, as well as the suppliers, large and small. Looking at the brands concerned, the British hot drinks market is polarised between the top five largest brands, which command over half of total off-trade value sales, and a scrum of smaller specialist suppliers.

Much of hot drinks’ recent off-trade growth has been supported by premium brands. Euromonitor’s analysis shows Nestlé, with its hugely popular coffee brands Nescafé and Nespresso, was the most significant player in UK hot drinks and specifically coffee in retail in 2017. But in recent months it’s Coca-Cola that has emerged as the company to watch, having rolled out RTD tea and coffee brands and bought Costa Coffee as outlets to sell them in.

Coca-Cola clearly likes raising the business temperature around the world with their marketing moves. So can we now expect them to raise the temperature of their product – literally – and march into hot beverages?

Honest Coffee, which CCEP launched here earlier this year, is Coca-Cola’s first venture into RTD coffee products, and their third entrant in the Honest range alongside Honest Herbal Tea and Honest Kids. Coca-Cola are no slouches when it comes to other RTD beverages, having launched their Fuze Tea brand in Europe after a strong global showing.

There’s no news yet from CCEP about launching into hot beverages. If there is, they haven’t told their PR agency. But the fact remains, Coca-Cola’s acquisition of Costa Coffee provides a platform for its RTD brands and Costa is all about hot coffee. GlobalData anticipates Coca-Cola will invest heavily in the market in China to take advantage of the opportunities there in hot and iced coffee and tea. And then presumably they’ll roll out the hot beverage products here. Watch this space!

BREWING BETTER HOT BEVERAGE SALES

With the market in a state of flux we asked the different suppliers what they saw as the retail and foodservice opportunities for hot beverages.

DRIVING AND MAXIMISING TEA SALES – THE ‘NEED TO KNOW’

Tea is a staple of the UK shopping basket and the nation’s favourite hot beverage, with 165 million cups drunk each day. Brett Grimshaw, Business Sector Controller Convenience and Out of Home at Tetley, the market leader in Total Impulse and in Scotland, says wholesalers and retailers should be aware of the leading brands and understand how to maximise sales in store.

Many of the wholesalers’ retail customers shop by list, so wholesalers’ attention needs to be drawn to the teas on offer in the depot. Brett Grimshaw continues:

“The ideal cash & carry layout should enable retailers to see the range of teas on offer so they can make their selection quickly, and encourage those with more time to look at the different types of tea available and add more to their trolley.”

Healthy Choices with Unilever

Consumers are making healthy choices these days across the grocery sectors, including about tea and other hot drinks. Noel Clarke, Vice President Refreshments at Unilever UK, is following the trend closely:

“Given our growing interest in making healthier choices, we have adapted our offering to include two new ranges, Perfect with Dairy Free, appealing to those on free-from diets, and The Tasty Decaf, with less than 0.2% caffeine.”

With the headlines full of plastic’s impact on the environment and the importance of recycling, Unilever’s PG tips tea bags have switched to 100% plant-based material and are now made from a renewable, fully biodegradable source. Unilever have also tapped into the ethical spending movement with Pure Leaf tea, sourced from certified Rainforest Alliance estates. Pure Leaf offers a choice of authentic flavours, from English Breakfast to Spiced Chai and Matcha. For on-the-go usage, new PG2Go features recyclable paper cups containing instant tea with milk powder. And with half of us taking tea on our holidays, PG tips holiday packs come in resealable pouches of 20.

Yorkshire Tea goes on growing Greg Harvey, Channel Controller, Taylors of Harrogate:

Taylors’ premium variant, Yorkshire Gold is a great addition to the fixture for customers wanting to trade up. Decaf tea sales are up 8.6% this year and Yorkshire Tea Decaf is driving category growth and outperforming the sector, with sales up 24.8%. Taylors of Harrogate have been supporting the convenience and independent sector with a Yorkshire Tea Decaf 40s PMP priced at £1.89.

Another Taylors product, Taylors of Harrogate Coffee Bags recently won the Product of the Year coffee award. The bags work just like a teabag and are filled with fresh roast and ground coffee in an easy-to-use “brewing bag”.

Tea is a great gift all year round, says Louise Cheadle, co-founder and tester at teapigs. An easy way to maximise sales is to encourage appropriate vendors to both serve and retail Teapigs teas in their different formats:

“Our packs of 15 servings are perfect for retail, as are our 30g tins of matcha and our matcha sachet range. teapigs’ tins of tea, piglets, teaware and matcha kits are the perfect choice for gifting. Offering them seasonally is a great option for accounts that are limited on space.”

COFFEE

Consumers’ desire for coffee-shop style drinks, and an increasing need for convenient on-the-go products is driving growth of Specialities and mixes in the coffee category. Gemma Povey, Shopper Marketing & Field Sales Manager at Jacobs Douwe Egberts takes a look at the market statistics:

“With consumers living increasingly fast paced lifestyles, they are searching for products they can easily purchase and consume on the move, specialities and mixes are an ideal impulse purchase just needing to add water, and bringing 31.5% incremental growth to the category.

As more consumers bring home their out of home coffee shop experience, Single Serve coffee penetration continues to grow. Single Serve is up +60 % in the Impulse channel but underindexes versus the total market. Tassimo is the market leader in the pods market with 60% share, reflecting the consumer trend for milky coffee drinks and the coffee shop experience. It is also the best performing pods product in terms of Value Sales in Impulse, accounting for 33% of coffee pods sales in the sector. In the pods category, it is important for retailers to capitalise on the opportunity of seasonality, especially around Christmas when coffee pod machines sales increase, as an excellent gifting opportunity.

The ongoing trend for premiumisation has also been reflected in instant, as shoppers continue to trade up to higher price coffees. Mainstream coffee is over-indexed in the impulse channel, whereas Super Premium coffee is under-represented. Decaf is another fast growing segment in instant coffee, up +12.5%.

Lavazza brings back Carte Noire

Lavazza Group is relaunching Carte Noire instant coffee to the UK grocery trade after taking over the production licence from Jacobs Douwe Egberts, two years after buying the UK rights for Carte Noire roast & ground coffee. Before its withdrawal in 2016, Carte Noire instant coffee was worth £35m and an Instant coffee top five brand. Lavazza has ambitions to grow the brand to £42 million over the next two years. As part of the relaunch, Lavazza has launched a Carte Noire Classique 100g Price- Marked Pack (PMP to the wholesale and convenience channels in two variants, Carte Noire Classique Instant and Carte Noire Decafeine Instant.

Take A Horlicks Moment With our busy schedules, it’s no surprise that a recent Mental Health UK survey shows 74% of Brits felt so stressed in the past year that they have been overwhelmed. The message from Aimia Foods, owners of the Horlicks brand is timely – what could be better than a soothing mug of Horlicks?!

Spanning print media, digital platforms and samplings, Aimia’s ‘My Horlicks Moments’ campaign encourages consumers to take a few minutes out to relax and enjoy those special moments, or simply unwind with a cup of warm, comforting and delicious Horlicks.

The Horlicks range consists of Traditional Horlicks, Horlicks Light Instant and Horlicks Light Chocolate Instant. This November also sees the launch of Horlicks’ new improved Horlicks Chocolate.

Nescafé Nitro

Earlier this year Nestlé brought nitrogen infused coffee to the UK with ‘NESCAFÉ Azera Nitro’ Americano and Latte, in nitrogen infused cans. Both are now available to retailers. In addition Nestlé Professional is offering chilled NESCAFÉ Azera Nitro Americano on tap in bars, pubs, restaurants and across the hospitality sector.

FOODSERVICE

Tea sales still cheer Foodservice is the other part of the hot beverages opportunity in the wholesale sector, led by tea. The value of tea in the UK foodservice market has seen a 13.6% increase between 2015 and 2017, says Brett Grimshaw, Business Sector Controller Convenience and Out of Home at Tetley, the No.1 wholesale tea brand, and the category remains buoyant.

] Quoting the latest Tetley Tea report, Brett says growth is expected to continue, with one in five consumers drinking more tea than a year ago. While the number of out of home coffee occasions (3.8bn) is higher than out of home tea occasions (3.1bn), coffee purchase continue to decline out of home, dropping 10% on 2016.

The Tetley Tea report shows black tea is responsible for the majority of volume out of home, or 81.9% of category value share, with Earl Grey and English Breakfast blends also experiencing growth, making them must stock products. The awardwinning Tetley English Breakfast blend won the Tea and Hot Chocolate category in The Caterer Product Excellence Awards in 2017. Fruit, herbal and green teas have observed significant growth in popularity, with herbal teas up 9.6% in 2017. As consumers become increasingly selective about their dietary choices, operators can promote the health benefits these different blends offer.

Tetley Catering Packs, available in various sizes and in decaf and original, are great for bulk tea servings in the cost sector, such as care environments. The Tetley string and tag range, which includes black and speciality teas, as well as fruit and herbal and green tea blends, are well suited to cafés, hotels and pubs. Tetley’s on the go solutions for consumers on the go or travelling are Tetley On The Go cups and Easy Squeeze tea bags. Tetley On The Go Fresh Seal cups contain inbuilt Tetley Easy Squeeze tea bags – simply add hot water to the On The Go cup and serve. Brand new this autumn is the Tetley Fresh Seal Green Tea On The Go Cup, available to wider foodservice channels and tapping into health trends. Last December, Tetley were awarded with the FWD Gold Medal for Foodservice Brand 2017, recognising their collaborative working relationships with wholesalers.

Rombouts raises the quality standard Rombouts has been supplying highquality coffee to the retail, catering and foodservice industry for over 50 years and offers a portfolio of hot beverages – filter coffees, biodegradable espresso pods, speciality and herbal teas – plus equipment and barista training. Simon Remmer, Sales Director at Rombouts says the market is changing dramatically: “There’s a consumer shift towards healthier, smaller hot beverages with less milk, like the Flat White, and more demand to experiment with alternative milks. Espresso pods are leading the way as the most convenient and consistent way to enjoy quality coffee.”

Simon Remmer says people are also looking to consume hot beverages in new ways, as seen in the popularity of cold brew coffee infusions. Rombouts’ new Cold Brew coffee range for retail and the foodservice/out of home offers a convenient solution to challenge the latest innovations from the high street.