Despite a backdrop of economic uncertainty and the rising cost of living, the coffee market has continued to grow over the last 12 months in both value and volume terms.
The out of home coffee market is now worth £7.3billion, having grown 7% since October {Kantar}.
While you’d be forgiven for thinking this growth is down solely to inflation, in the out of home sector, both purchase frequency and consumer penetration have also increased during this period, up 8.5% and 1.4% respectively. This demonstrates that despite rising prices, more people are buying coffee out of home more often.
By sector however, we’re seeing some consumers switching coffee purchases out of full-service restaurants into coffee shops, bakeries and quick-serve-restaurants as they seek both to manage increasingly squeezed budgets and the perennial desire for a treat. The latest Kantar data suggests bakery and sandwich outlets, as well as the likes of supermarket cafés, are driving shopper frequency and attracting consumers faster than the wider market now.
“The continued growth of the UK coffee market represents an opportunity for wholesalers to drive sales,” comments Richard Milner, Category Insight Manager, Lincoln & York. “However, there are several factors to bear in mind. Consumers have become accustomed to high-grade and specialty coffee wherever they choose to drink it. We can see this across all areas of hospitality, with quick serve restaurants, coffee shops, hotels and restaurants all focusing on their coffee offering and talking up quality in store and across their communications platforms. This means wholesalers should ensure they are catering for this and that they prioritise quality and flavour when it comes to their coffee range.”
As well as stocking high grade commercial coffee as standard, wholesalers could also consider offering specialty options too – in the form of specialty grade single origin coffee or specialty blends. Specialty coffee has to pass certain criteria for quality, meaning that it can be offered at a premium to your customers. When assessing the quality of coffee, Q Graders score coffees on a 100-point scale, evaluating all attributes of the flavour profile including sweetness, acidity, body and balance. To be deemed specialty, the coffee must score 80 or more on the Q scale – offering a superior flavour and aroma and making this the best quality coffee that you can provide.
It’s not just quality that consumers are looking for in coffee. Another growing trend for the wholesale sector to be aware of is the growing popularity of functional coffee. These are coffees equipped with functional benefits, including antioxidant or anti-inflammatory properties and stress-relieving effects. For example, starting the day with mushroom coffee, such as Lion’s Mane, is said to promote enhanced brain function, aiding memory, focus, and concentration.
In the retail space, innovative brands are proving popular thanks to their functional properties, and as such wholesalers could consider offering functional options alongside more traditional coffee, as people come to expect more benefits from their morning brew.
Edward Watts, UK&I Sales Director, Jacobs Douwe Egberts, comments: “With the coffee category now worth over £1.6 billion (Kantar) and more than 24 million households in the UK buying coffee (Kantar), wholesalers can continue to benefit from the growing opportunity from this category. Coffee plays an essential role in shoppers’ routines, as one of the most difficult beverages to go without (Toluna). With consumers increasingly looking for more evolved coffee shop-style coffees that deliver on taste and quality, it remains vital for wholesalers to offer an exciting and diverse coffee range to make the most of the category.
“Wholesalers should consider stocking household favourites such as Kenco, L’OR, Douwe Egberts and Tassimo which allows retailers to purchase convenient but still delicious ways to enjoy their coffee shop favourites.”
The coffee shop trend continues to grow, with 49% of consumers claiming to visit coffee shops less to save money – and most drinking more at home (NIQ).
Consumers are trading up on their weekly shop with products that allow them to easily recreate their favourite coffee shop experiences. This trend is being proven through the immense growth within the specialities and mixes segment. In fact, we have seen an increase in spend in June 2023 vs June 2022 on soluble specialities (Kantar), gaining greater penetration than any other segment in the last six years, with the segment now worth over £215 million (Kantar). What’s more, these products are also key to recruiting a younger shopper and expanding the popularity within the coffee category.
Tapping into the market trend for coffee-shop-worthy beverages, Kenco Cappuccino and Latte sachets allow consumers to recreate that great tasting, frothy coffee without the need for a coffee machine.
Coffee shop-branded products, like the Tassimo Costa range, continue to be incredibly popular. With options from cappuccinos to lattes, shoppers can bring versions of their usual Costa experience into the home, presenting a real opportunity for retailers as shoppers look for coffee shop-worthy beverages at the touch of a button.
“Many sectors have seen growth, in particular, the iced specialties; now worth over £4 million (Nielsen). This showcases the opportunity for retailers to drive growth by offering iced coffee options to make at home,” adds Watts.
“In the mood for a macchiato, longing for a latte, or craving a cappuccino? Every coffee drinker has their preference, so we’ve developed a portfolio that gives people the chance to customise their coffee to meet their needs, including products such as our Kenco Iced/Hot Lattes.”
Kenco Iced/Hot Lattes create even more consumption occasions and provide a great opportunity for retailers to maximise their rate of sale throughout the entire year – with iced lattes perfect for the summer and hot lattes ideal for the winter months. Kenco’s Iced/Hot Lattes Salted Caramel and Vanilla achieved over £4m in value sales in 2023 (Nielsen) and are now worth £3.5m (Nielsen), showcasing the opportunity for retailers to drive growth with indulgent options all year round.
David Balderstone, Clipper Teas Brand Manager at Ecotone UK, comments: “We know that ethical and sustainable shopping continues to increase – with one in three households now identifying as driven by high eco-and-environmental intent (Kantar), up from 24% the previous year. As a result, interest in hot beverages that are produced in a fair and sustainable way is growing in popularity. Despite the pressures of the cost of living crisis, the organic market was back to positive growth towards the end of 2023 (Nielsen) – and in black tea specifically.”
Clipper is launching a new range of organic infusion blends with naturally bold flavours. Each blend meets a key need state: with Turmeric & Orange to put a lively spring in your step, Blueberry & Blackcurrant to uplift your mood, and Chamomile & Peach for unwinding.
The brand has unveiled a redesign across all its infusions that clearly and simply illustrates the delicious flavour harnessed in each unique blend.
Clipper is outperforming the category in Black Tea and is the fastest-growing infusions brand. Its value growth is up 18% over the past year (IRI). The continued success of its infusions and black tea demonstrates that it is making organic tea accessible to increasing numbers of consumers.
“We partly accredit our strong and sustained growth to our successful GOOD Tea 360 campaign that launched at the start of the year, which helped consumers learn about what makes a ‘good’ cuppa underpinned by the strapline, There’s Tea, Then There’s GOOD Tea,” adds Balderstone.
The GOOD TEA campaign showcased the benefits of getting out into nature and choosing a Fairtrade & organic tea that not only tastes good but does good too. To encourage consumers to engage with nature the brand ran an enticing on-pack promotion, offering a free subscription to outdoor adventure app All Trails+, and a chance to win eco-friendly holidays.
The integrated campaign was a £1m+ investment and spanned across television, social and PR, reaching more than 16.3 million people. The campaign has helped fuel recent brand growth, with brand share and penetration reaching their highest ever levels.
The Total Food Beverages category which comprises hot chocolate, cocoa and malted drinks continues to grow and is worth £204 million, with brands accounting for more than 80% of category value (Kantar). Michelle Frost, General Manager at Mars Chocolate Drinks and Treats, says: “With brands contributing significant value to the overall category, with £4 in every £5 spent on hot milky drinks spent on brands, our Galaxy and Maltesers instant hot chocolate jars continue to attract repeat shoppers to the hot chocolate aisle.
“To entice new shoppers and gain incremental sales, we also use the strength of these renowned brands in different formats such as sachets, jars, drinking chocolate and pods.”
Hot chocolate should be displayed alongside other hot beverages such as tea and coffee.
It is important to offer a selection of choices within the core hot chocolate segments – instant hot chocolate, add milk, indulgent, malted and cocoa.
Adam Hacking, Head of Beverages at Arla, comments: “Chilled coffee remains a comparatively new concept for much of the UK population, however, there is consistent momentum around more people buying into the sub-category, with greater frequency and in greater weight. It has reached a significant scale quickly and as a sub-category, ready to drink (RTD) chilled coffee is now worth £280m (Nielsen IQ), with brands and products on offer that deliver particularly strong cash ROS.”
Starbucks® Protein Drink with Coffee launched on 13th June. This is Starbucks’ debut protein and offers the delicious flavour you’d expect from the UK’s number one RTD chilled coffee brand, with the added benefit of being a convenient, high-protein beverage, the innovation can be enjoyed on-the-go to support active lifestyles.
Crafted from a smooth blend of Starbucks® Arabica Coffee, with 20g protein per bottle (330ml), creamy low-fat milk, and no added sugar (contains naturally occurring sugars), Starbucks® Protein Drink with Coffee is available in three coffee variations: Caffe Latte, Chocolate Mocha flavour, and smooth Caramel Hazelnut flavour. The high-protein range adds strength to the protein category which has seen exponential growth, increasing in value from £46m in 2021 to £147m in 2024 (Nielsen).
Created with an active lifestyle in mind, the Starbucks® Protein Drink with Coffee is designed to be enjoyed, whenever consumers need it. The high protein content supports daily protein intake, without compromising on taste.
Starbucks’ consumers are some of protein’s biggest fans – in fact, they buy it 6.1 times per year more frequently than average protein buyers (Kantar). Now they can enjoy it with the same great taste as Starbucks’ chilled coffee.
“By appealing to existing protein drinkers as a trade-up opportunity and by tapping into the penetration opportunity for new shoppers, Starbucks® Protein Drink with Coffee will continue to drive growth in the milk-based beverage category,” adds Hacking.
Starbucks® chilled coffee remains the leading player within the Ready to Drink (RTD) category (within the dairy sector), worth £145m within a total category worth £297m (Kantar/Nielsen). The brand has continued to grow with an 18% value and 25% volume increase in the last 12 months (Kantar/Nielsen). Starbucks® chilled coffee has gained a 3.3% value market share in the past year (Kantar/Nielsen), which is more than any other brand in the category, is larger than the next four brands and own-label combined.
This significant growth has been driven by innovative product launches that cater to the ever-evolving consumer need states. For instance, Multiserve is the fastest-growing segment in RTD coffee as shoppers look to new consumption occasions and use the product more as a take-home drink. 2022 saw the launch of the Starbucks® chilled coffee Multiserve range; 750ml sharing size formats in three flavour variants – Caffe Latte, Caramel Macchiato and Skinny Latte – allowing coffee lovers to enjoy their favourite chilled coffee at home. These continual innovations and range increases have led to Starbucks® chilled coffee being the fastest growing brand in these formats, increasing 138% year on year, or an equivalent £19m YoY (Kantar/Nielsen).
“As the category leader, it’s no surprise that Starbucks® chilled coffee has a significant impact on category performance and has been the main driver of growth,” says Hacking. “Having a clearly defined approach to a price and promotional strategy has been a key lever, alongside a 360-degree marketing plan. This has proven effective, with Starbucks® chilled coffee contributing 80% (or £23m) of total category growth (Nielsen). In fact, 2023 was Starbucks® chilled coffee’s biggest year yet for marketing investment with significant NPD marketing support as well as multiple activations to drive trial and extend usage occasions.”
For example, to drive sales of the new Starbucks® Skinny Latte Chilled Coffee, part of the Multiserve range, Starbucks® chilled coffee worked with a range of micro to mid-level influencers to inspire a wide range of audiences to pick up the NPD and incorporate it into their everyday at-home routine. Overall, the campaign had a reach of over 1.3 million. Out-of-home activations were strategically timed to capitalise on the peak summer months and to build usage during the festive period, a time not usually associated with chilled coffee. Both immersive experiences showcased the versatility of chilled coffee throughout the year to extend usage occasions and raise awareness of Starbucks® chilled coffee’s point of difference.
Adrian Hipkiss, Commercial Director at Boost Drinks, comments: “Now worth over £233m (Circana) in the UK, the RTD Iced Coffee category is growing rapidly, with Symbols and Independents sales having now grown to over £43m (Circana).”
The RTD Iced Coffee category is growing rapidly at +128% value since 2019 (Circana). Boost’s Iced Coffee offering boasts an attractive retail price point, positioning it as a compelling choice for retailers to stock complimenting higher price point SKUs.
Aligning to their core principles of offering great taste and value at a fraction of the price of the brand leader stocking Boost is a guaranteed way of delivering exceptional value to consumers for their money.
“To capitalise on the burgeoning growth of the category, retailers need to allocate enough space for RTD iced coffees and stock lucrative brands like Boost, the third fastest growing brand in the category (Circana),” adds Hipkiss. “In recognising this increasing demand for iced coffee, Boost instigated an innovative in-depot fixture within one of Scotland’s largest depots, and Unitas member United Wholesale, which saw leading chilled coffee brands displayed prominently together – driving retailers to iced coffee products and promoting further category growth at +12%. Boost strives to replicate this successful activity with other trusted partners, fuelled by its founding principle The Honest Broker, which encourages mutual growth through open communication and collaboration.”
Flavoured Iced Coffee SKUs are proving to be the highest velocity factor in consumer spending. Caramel (+24%) which features in Boost’s offering, is the top flavour in the space and accounts for 31% of the category’s sales value (Circana). Boost is now the 3rd largest selling RTD Iced Coffee brand in unit sales (Circana), with over 50% of iced coffee sales delivered by the 250ml variety format (Circana).
Iced beverages continue to be a popular option for consumers as an afternoon pick-me-up or a convenient beverage that travels well when on-the-go. The growing demand for iced coffee now means one in three hot coffee drinkers prefer an iced coffee on a warm day, with RTDs delivering a great, affordable treat that UK shoppers are increasingly looking for (Circana). As such, this provides retailers with a great opportunity to draw customers in, especially over the summer months, and in turn maximise sales. To successfully capitalise on the growing popularity of RTD iced coffee, retailers and wholesalers should look to stock value brands like Boost.
Amy Burgess, Senior Trade Communications Manager at Coca-Cola Europacific Partners (CCEP), comments: “The ready-to-drink (RTD) chilled coffee sector is becoming an increasingly popular choice with consumers. In fact, RTD chilled coffee is growing ahead of total soft drinks in both volume and value, and is now worth more than other segments, including adult soft drinks and mixers (Nielsen).”
The Costa Coffee RTD range is helping to drive growth, up 10.4% in value in convenience over the past year and growing ahead of the RTD chilled coffee segment in this channel (Nielsen). This success can be put down to the widespread popularity of the Costa Coffee brand, the nation’s favourite coffee shop for the last 14 years (Allegra). It is also one of the only full ranges in the segment to be 100% HFSS-compliant. RTD chilled coffee is incredibly diverse. Featuring Lattes, Flat Whites and Frappés, Costa’s range caters to a broad variety of different tastes and occasions, offering shoppers a choice of low, medium and high intensity caffeine options as well as different coffee flavours and levels of sweetness.
At the beginning of the year, CCEP launched PMP versions of the Costa Coffee Latte and Caramel Latte RTD ranges, offering a unique selling point exclusive to convenience retailers to help enhance their competitive edge when it comes to the RTD chilled coffee segment.
And this summer CCEP launched a new on-pack promotion across the Costa Coffee RTD chilled coffee range, giving consumers the chance to win tickets to some of the UK’s biggest music festivals, including Cornwall’s own surf and music festival, Boardmasters – which Costa Coffee is partnering with for 2024.
Jimmy’s Iced Coffee has expanded its SlimCan range with a 250ml price marked pack format. Rolling out exclusively across the convenience and impulse channel, the brand is supporting retailers with their ready to drink Iced Coffee range with a value offering. The new format will span Jimmy’s Original, Mocha, Caramel and Strong flavours, with a £1.39 price on pack.
PMPs are more instrumental than ever for retailers looking to communicate value to their shoppers, as consumers continue to monitor their spend. In fact, the overall price of a product is the most important cost factor for consumers, above the price per weight or volume (Nielsen IQ). Additionally, 63% of retailers feel that PMPs stand out on shelf and 59% recall that the format increases sales (Lumina).
Ben Parker, Britvic’s Retail Commercial Director in Great Britain, comments: “We know that shoppers are looking for value when it comes to choosing their next on-the-go drink, and with price marked packs holding 34% share of sales across total impulse (Nielsen IQ), the new Jimmy’s Iced Coffee PMP format is sure to help retailers deliver on this. Consumer loyalty is key for independent retailers looking to maintain long-term success and offering value driven products is essential in the current landscape.”
With the RTD coffee category worth £18.2m RSV (Nielsen IQ) and Jimmy’s a well-known and trusted Iced Coffee brand, it is well placed to expand its range with a PMP RTD Iced Coffee beverage. Jimmy’s Iced Coffee is also HFSS compliant, ethically sourced using Rainforest Alliance certified coffee and endlessly recyclable, so it is suitable for promotion at store entrances and checkouts, providing endless opportunities for retailers to drive sales and encourage impulse purchases, all whilst strengthening their RTD Iced Coffee range.
Jimmy’s Iced Coffee PMP is available to the convenience and impulse channel now, across Original, Mocha, Caramel and Strong flavours. The format will be available in a 250ml pack size, with a MRSP of £1.39. Jimmy’s Iced Coffee is helping retailers answer consumer demand for on-the-go protein beverages, with the launch of its collaboration with Myprotein. Available in Original and Caramel flavours, Jimmy’s Myprotein Iced Coffee contains protein enriched milk and boasts 5.6g of protein per 100ml, as well as being HFSS-compliant.
The launch is set to help retailers tap into the UK protein market, which is estimated to reach over £438m in 2024 (Mordor Intelligence). In fact, the Global Ready-to-Drink (RTD) Protein Beverages market was valued at $1.56 billion in 2023 (Evolve Business Intelligence), meaning there is significant opportunity for retailers to drive footfall in store and maximise sales with a RTD protein drink solution.
Ben Parker adds: “We know that shoppers have been on the hunt for on-the-go protein beverages for a while now. So, collaborating with Myprotein to bring together the rising protein trend and the popularity of RTD coffee is set to tick numerous boxes for consumers. The Jimmy’s Myprotein Iced Coffee will appeal to those looking to incorporate more protein into their diet. The collaboration presents a huge opportunity for retailers to expand their RTD iced coffee range, appeal to new shoppers and increase basket spend.”
The original flavour is available across the Grocery, Convenience and Wholesale channels, in a 4 x 250ml SlimCan multipack suited to drive on-to-go consumption, and a 380ml BottleCan. The launch will be supported by fitness and sport brand giveaways, influencer activity and product sampling to drive awareness.
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