The total Hot Beverages market is worth £320m in Convenience and is growing at 7.8% year on year, twice as fast as the total market.
There has been an additional £23m spent on the category this year. This growth has come through more shoppers spending more, at higher prices, year on year, as shoppers trade up. (IRI & Kantar).
Ready To Drink (RTD) Cold Coffee has grown, with the total market +20% and is worth £132m. Convenience is growing +9%. (IRI).
The Tea sector is worth £97m in Convenience and grows by +3.6% year on year forming 30% of the category (IRI & Kantar). This growth has been delivered through more shoppers and shoppers trading up into premium sectors and brands. (Kantar).
There has been a growth of pods with over 4 million households buying pods (IRI). The growth in the total tea category is coming from Black Decaf Tea, up 5.4% YOY, Fruit & Herbal, up 3.5% YOY and Speciality, up 0.8% YOY (IRI).
Super Premium Instant Coffee is now 58% the size of Regular Instant Coffee in Convenience (IRI).
“Wholesalers need to ensure the right amount of shelf space is given v market share and they also need to offer all relevant pack sizes including bigger pack offering due to current consumer demand,” suggests Kenton Burchell, Trading Director at Bestway Wholesale. “They need to be aware of trends in the market with cold fusion, premium offerings and good value branded offerings. They also need to have pricing on & off with clear POR retailer messaging on depot racks which are often missing and are so important to making the right decisions. Wholesalers need to offer category advice in the right formats and updated regularly taking insight that is impartial.”
Melody Chapman, Sales & Marketing Director at Typhoo Tea Ltd, comments: “Hot Beverages continues to be a profitable category for convenience retailers and wholesalers, growing at +19% YoY, more than double the rate of that in the grocery channel. Tea and coffee are the star performers, leading in sales and growth, as more consumers try to replicate their usual coffee shop experience at home.”
With people spending more time at home due to COVID-19, millions of consumers have rediscovered their love of a traditional cuppa and they are drinking more hot beverages in the home than ever before. This has led to an increased demand for tea and coffee with shoppers purchasing more frequently, with a higher basket spend per trip.
There has been a significant move towards convenience store shopping, as ease of shop, value assurance and availability become more important to many consumers. Brands continue to outperform own-label in this channel, as shoppers look for their favourite household names, and price-marked packs are becoming ever more crucial, as they help retailers to build a perception of value, trust and loyalty with many shoppers.
Stocking everyday tea alongside great tasting decaf and quality gold formats, allows customers the option to confidently trade up and gives retailers an opportunity to increase basket spend.
Typhoo Tea Original, Decaf and Gold are staples in the Hot Beverages fixture, with a mixture of pack sizes from 40s and 80s to 240s available to cater for different fixture sizes and a range of consumer needs, as people continue to purchase more frequently throughout the pandemic.
“Wholesalers should offer Typhoo Tea 40s in a PMP format and complement this with Typhoo Original, Decaf and Gold in 80s PMP, in order to provide retailers with solutions for different shopper missions, whilst stocking a brand that they know shoppers will love and will also deliver excellent margins,” suggests Chapman.
Michelle Jee, Tetley Senior Brand Manager – Out of Home, comments: “Out of home hot beverage consumers are becoming progressively more adventurous in their choice of flavours and blends. 47% of consumers are inclined to spend more money on their drinks as they seek out premium and healthier hot beverage options.”
As consumers continue to explore and trial new hot beverage blends out of home, they want operators to provide them with a selection to test new flavours. This has led to a significant growth in popularity for fruit, herbal and green teas. Consumers are becoming increasingly more health conscious, therefore operators are able to introduce the health benefits of different blends and tap into driving more sales in this current market trend.
Tea drinkers are becoming progressively more adventurous in their choice of flavours and blends, and are also inclined to spend more money on their drinks as they seek out premium and healthier hot beverage options. To meet this growing trend, Tetley is launching its new and improved enveloped tea range, now available in 100% recyclable packaging, and hygienically sealed for safety and freshness. With all the taste of Tetley, the revived range is available in ten specially selected blends, including English breakfast, herbal variants such as Fresh Mint and Zesty Lemon & Ginger, and a selection of fruity and green infusions.
Presented in 100% recyclable packaging, the new range now features fully biodegradable tea bags, which remain completely plastic free. With research indicating that 42% of consumers are already actively choosing brands due to their environmental values (Deloitte), it’s more important than ever for operators to seek sustainable food and drink solutions from their suppliers.
Additionally, as the sector continues to adapt and recover as a result of the pandemic, the individually sealed envelopes offer a safe and hygienic serve solution – ideal for a range of foodservice environments, including cafes, care homes and contract catering.
“Tetley recommends blocking brands and arranging best selling products together, it’s important for wholesalers to promote their range to customers accordingly as this can reflect in their sales and overall customer engagement,” says Jee. “For easy navigation, it’s crucial that different teas are displayed in a clear sequence where the shopper can easily distinguish what’s on offer. To further aid in up-selling and boost sales overall, supply a range of teas in different sizes and formats, particularly in blends such as green, fruit & herbal, and speciality as these blends have seen significant and consistent growth in the market.”
To help shoppers navigate depots and shop with ease there should be clear signposting in the hot beverage sections and POS should be used to maximise sales. Tetley has accommodated this by creating a range of both on and off shelf POS.
With total retail category sales of coffee soaring by +10% year on year to top £1.2 billion by the end of 2020 (Nielsen), it’s clear that stay at home Brits were keen to replicate their usual coffee shop experience at home during the challenges of the last year, with this trend looking set to continue throughout 2021.
Cafédirect, which invests 50% of all profits into Producers Direct – a UK charity that works directly with farmers to improve sustainability and livelihoods, right across the coffee growing world – has been one of the key beneficiaries of this trend, with retail sales of its range of Single Grind, Freeze Dried and Beans surging by +43% (value) in the last year.
“We very quickly witnessed a significant increase in retail sales from the first lockdown last March, and that upward trajectory has very much increased ever since,” explains Lesley Parker, Brand Controller for Cafédirect at distributor RH Amar.
In particular, it’s the premium end of the category that has seen the greatest growth. Sales of Roast & Ground, for example, are up by +19%, whilst Single Grind offerings and Beans are up by +14% and +27% respectively.
It’s the same picture in Instant Coffee, too, with all the growth coming from more premium offerings. Sales of Freeze Dried products, which account for more than half (£402 million) of instant coffee’s total sales of £757 million, are up by +6% year on year, whilst sales of the category’s more entry level granule-based products are down by -3% to account for £143 million.
“It’s clear, therefore, that the direction of travel continues to be towards the more premium end of the category, and it’s important that wholesalers and retailers of all shapes and sizes bear these trends in mind when deciding what to stock,” adds Parker.
Cafédirect is embarking on one of its most comprehensive ever product, marketing and promotional plans in 2021, to help wholesalers and retailers continue to meet the demand for premium coffee and other hot beverages.
This includes setting ambitious growth targets.
“Obviously, our exact targets remain private, but it’s fair to say that we feel there is another big opportunity for premium hot beverages in 2021,” explains Parker. “We want to help wholesalers and retailers meet that demand, as well as fulfilling the ongoing demand for premium products within foodservice as and when circumstances permit.”
Cafédirect has a pipeline of new product and packaging developments including a new look for Single Origins. Rolling out now, Cafédirect is giving its Single Origins range of coffees a new look for 2021, as well as introducing new Colombia Reserva (RRP: £3.99, 227gm) to the range in March. The new look features bold, on-pack graphics to offer shoppers clear visual clues to the line-up across Machu Picchu full strength and decaffeinated, Mexico-inspired Mayan Gold, and Kilimanjaro.
Meanwhile, Cafédirect will be introducing a number of promotions throughout 2021 to support its popular, three-strong range of Roast & Ground Blends – Smooth, Lively & Intense (all RRP: £3.75, 227gm) – to create even greater awareness and promote trial.
Cafédirect is also giving its range of Instant Coffee a new look for 2021, as well as adding a new Machu Picchu Decaf (RRP: 3.99, 227gm) offering to the line-up this coming spring. There are also plans for a whole new range of additional instant variants underway for this summer.
“In line with the insights and category dynamics around premium, there is a big opportunity for the right propositions within instant coffee, so we look forward to working with wholesalers and retailers to continue this trend in 2021,” adds Parker.
Cafédirect is also giving its Everyday Tea offering a new look for 2021.
To celebrate the new look for Single Origins, Cafédirect was back on air from February with the first of two planned TV advertising bursts behind range hero Machu Picchu.
In line with Cafédirect’s growth plans for 2021, it will be promoting its brands and products throughout 2021, including through a half-price promotion across the Blends range on popular shopping app Shopmium this spring.
The promotion will be featured alongside a full-screen lifestyle ad on the Shopmium app and will be promoted via social, with an estimated reach of 1 million impressions to be created among target shoppers.
In addition, RH Amar will be offering customers a number of promotions throughout 2021.
Parker adds: “This is an exciting year for Cafédirect, and for the hot beverages category in general, particularly in retail.
“It’s clear that it will still be some time before life returns to normal, and it remains to be seen what the new normal post-Covid will look like. What’s certain, though, is that the hot beverage – and in particular coffee – consumption habits that we have built up as a nation over many years, have now clearly moved into the home.”
Georgina Cowley, Marketing Manager at Lincoln & York, comments:: “With consumer habits having changed so much in the last 12 months, knowing which products to stock is perhaps now a slightly more complex task. The increased popularity of coffee beans (+35%) and ground coffee (+18%) [Kantar] in consumers’ homes should be reflected in stores: both have been growing significantly faster than instant coffee (+10%) throughout the pandemic. Coffee bags, however, have been the major winner, with Kantar data having shown growth of over 40% driven by large numbers of new shoppers and, if stocked, this provides a great opportunity to drive incremental sales in the category [Kantar].”
While gaining new shoppers – or driving market penetration – is one of the most powerful ways of driving sales, shopping frequency has also been important during lockdown.
“Wholesalers need to capitalise on the most up to date consumer dynamics by charging up the deals and promotions they offer – linking deals with other, ancillary categories is a powerful way to do this and utilising the frequency of shop as a means of building ever stronger consumer loyalty,” adds Cowley. “With the current move towards technology and the increase in online sales during the pandemic, making sure wholesalers have the right taxonomy on their hot drinks websites and also featuring key products on apps, if they have them, will be very important as more consumers shop online moving forward.”
Lincoln & York has recently launched fully recyclable coffee packaging – the first in the UK. This packaging has the same shelf life as traditional coffee packaging but can be recycled in the LDPE waste stream within the UK.
“In these uncertain times, businesses in every sector are scrambling to readjust their business model to address the remote working scenario which is unlikely to change any time soon,” adds Cowley. “This is no different for wholesalers, who for now cannot accommodate as many physical customers in their stores. To best maintain sales, wholesalers will need to quickly establish an ecommerce platform to ensure products can still get to their customers. Reviewing the coffee range on offer is also a good idea: with all the restrictions on normal shopping, it is important to be sure the best range of the best coffee – in the best packaging format too – is available for the consumer. It is our guess that whatever works well in times of lockdown will be just as successful when normal life resumes.
“We have seen a lot of wholesalers opening for trade to the public where there is unprecedented demand across the retail sector. As a result, wholesalers must quickly analyse their data and understand where demand has been in the past few months and where it is likely going. In doing so, they will remain aligned with consumer demand and can continue to serve their customers.
“We would also recommend looking at a home delivery service. This is a trend that is not going away and is growing fast in the out-of-home market as well as the in-home market. Most retailers are now quoting 2/3 week turnaround which could be too far out for a lot of customers. Finding ways to provide quick, reliable and trustworthy supply routes will help shape that competitive edge.”
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